Chinese shares partially rebounded on Wednesday from a 4.5 percent plunge on Tuesday, but analysts said the outlook was murky because of worries that the environment which supported this year's bull run was changing.
The Shanghai Composite Index, which suffered its biggest percentage drop in two months on Tuesday, fell as much as 1.72 percent at one stage on Wednesday but closed 1.15 percent higher at 5,172.627 points.
Rising Shanghai stocks outnumbered losers by 520 to 326. But turnover in Shanghai A shares shrank to a three-week low of 148.2 billion yuan ($19.7 billion) from Tuesday's 169.0 billion.
A flurry of buying back in blue chips during late trade pushed the index up. Ping An Insurance climbed 4.12 percent to 100.24 yuan. Aluminium Corp of China (Chalco) surged 4.49 percent to 49.12 yuan. Industry sources said some refineries had raised spot alumina prices by 3 percent over the past week, and while Chalco did not lift its prices, a source at the firm ruled out market talk of a price cut in late September.
Huaneng Power, viewed by some as a defensive stock because of its focus on power generation, soared 8.76 percent to 16.39 yuan. FAW Car Co jumped 4.76 percent to 20.79 yuan on continued speculation that it might receive an asset injection from its parent.
However, many analysts and fund managers think Tuesday's plunge showed the index, which more than doubled this year to last Thursday's all-time high, might be in for a substantial pull-back - its first since the market tumbled as much as 21 percent over several days in late May and early June. "This rebound is just a chance for investors to reduce their holdings," said Huang Yan, fund manager at Guotai Fund Management.
Tuesday's announcement that August inflation jumped to a 10-year high of 6.5 percent was preceded by several monetary tightening steps, and is expected to be followed by more tightening.
Vanke, China's biggest listed property developer, ended up 0.62 percent at 30.97 yuan after dropping to a low of 30.00 yuan, well below the 31.53 yuan price of its recent issue of 317 million new shares - another sign, traders said, that institutions were scrambling to sell.
Some stocks plunged despite news that might normally have boosted them. Beijing Capital Tourism, which had gained 3 percent on Tuesday, tumbled its 10 percent daily limit to 51.89 yuan after saying it would issue up to 791 million yuan worth of shares to fund the purchase of controlling stakes in three Beijing hotels.
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