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SHANGHAI, CHINA - Chinese share prices closed 0.87 percent higher Tuesday after a plunge the previous day, with sentiment soothed by an overnight rally on Wall Street, dealers said.
Asian investors were encouraged by the advance in US stock markets on expectations that the Federal Reserve will look to inject liquidity into the US market by cutting interest rates further this week.
"There is technical need for a rebound after the sharp fall yesterday, while investors have to watch the movements in the regional markets closely," said Yu Zuojie, an analyst with Shanghai Securities.
But the technically driven gains in Shanghai were capped as investor confidence is shaky following the recent turbulence on overseas markets triggered by fears that a sputtering US economy will hit growth in Asia.
Investors were also nervous that Chinese regulators could move to cool soaring inflation by putting in place a series of market cooling measures, such as tightening up on credit.
"We saw volatile trade today and turnover fell further. Many investors stayed out because they were worried about policy tightening and overseas uncertainties," said Zhang Qi, an analyst at Haitong Securities.
The benchmark Shanghai Composite index, which covers both A and B shares, closed up 38.65 points to 4,457.94 on turnover of 79.56 billion yuan (10.90 billion US dollars).
On Monday, the index tumbled more than seven percent to 4,419.29 points, its lowest level in five months.
The Shanghai A-share Index rose 40.35 points or 0.87 percent to 4,678.16 on turnover of 79.21 billion yuan and the Shenzhen A-share Index added 9.40 points or 0.67 percent at 1,415.04 on turnover of 38.98 billion yuan.
Property developers rebounded after the yuan finished at a new record high of 7.1950 to the US dollar on Monday.
A stronger local currency helps property firms reduce the cost of dollar-held debt.
Poly Real Estate Group gained 3.38 percent to 65.84, while China Vanke rose 1.88 percent to 26.03 yuan.
Heavyweights also advanced with PetroChina adding 0.18 yuan to 24.20, and Shanghai International Port up 0.22 yuan to 7.91.
Hisense Electric, one of China's biggest TV manufacturers, gained 0.45 yuan to 13.35, after projecting 2007 net profit growth of over 50 percent.
Transport companies however continued to be sold down amid concerns over severe weather in many parts of China.
China Eastern Airlines Corp lost 2.50 percent to 15.23 yuan, and Daqin Railway fell 3.88 percent to 21.53 yuan.
Ping An Insurance closed down 0.05 yuan at 72.48, even after it projected 2007 net profit growth of more than 100 percent.
The Shanghai B-share Index rose 5.55 points or 1.82 percent to 310.41 on turnover of 353.16 million US dollars and the Shenzhen B-share Index added 1.78 points or 0.28 percent to 627.37 on turnover of 329.88 million Hong Kong dollars (42.29 million US dollars).
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