China's shares closed 0.86 percent higher on Tuesday after institutional funds sought bargains among large caps such as top Asian refiner Sinopec Corp. The benchmark Shanghai composite index closed at 1,110.147 points after rising just 0.05 percent the previous session.
Sinopec gained 1.74 percent to close at 4.10 yuan. It fell 0.25 percent on Monday after its major unit Shanghai Petrochemical Co Ltd said it would not be taken private by its parent.
Shanghai Petrochemical, the country's largest integrated petrochemicals company, also gained 1.8 percent to close at 3.41 yuan after shedding 1.5 percent on Monday.
Analysts said shares of Sinopec and its Shanghai unit rose on a clarification by the two companies, easing investors' concerns on a potential merger.
"Funds are seen to have bought into Sinopec again today," said Zhang Qi, an analyst with Haitong Securities.
Other major gainers included top Shanghai-listed lender China Merchants Bank Co, which rose 1 percent to 6.11 yuan.
The most actively traded stock on Monday was China Unicom, the smaller of the two mobile phone network operators, which closed 1.16 percent to close at 2.62 yuan.
China's benchmark index, lifted by the yuan revaluation in July, is still down about 14 percent this year.