China shares rose 1.97 percent on Thursday as funds that had been locked up in Bank of China's subscription returned to the market. But modest turnover disappointed many traders. The benchmark Shanghai Composite Index closed at 1,671.618 points.
Turnover in Shanghai A-shares was 28.9 billion yuan ($3.6 billion), the highest for three weeks but still lower than many had expected. "The trading value is still thin, taking into account the massive amount of funds unlocked today," said Luo Xiaoming, an analyst at Ping An Securities.
The retail portion of Bank of China's domestic initial public offer, China's largest ever, was massively oversubscribed, locking up about 540 billion yuan since Friday. Analysts had therefore expected Thursday's turnover to exceed 30 billion yuan.
"Although I believe the index will rise further, led by Bank of China's debut, which should be strong, individual sectors are more likely to decline in the short term," said Luo. Bank of China will list in Shanghai on July 5.
Moderate trading volumes suggest investors still think the market, which is up 44 percent since the start of this year, remains vulnerable to profit-taking, traders said. Steel shares were among the day's biggest gainers for the second straight day, after the industry association predicted the sector's profits would rise 15 percent this year.
Top steel maker Baoshan Iron and Steel Co Ltd closed at 4.42 yuan, up 4 percent, while smaller rival Baotou Iron and Steel Co Ltd rose 3.27 percent to 2.53 yuan.
Another strong sector was machinery, after the State Council declared that developing the sector was a key industrial goal and laid out principles for upgrading and restructuring the industry.
Xiamen Engineering Machinery Co Ltd and Changlin Co Ltd both jumped their 10 percent daily limit to close at 3.83 and 4.06 yuan. Consumer stocks, which had been the best-performing sector for the past week, ran out of steam. Tonghua Wine, which has gained about 50 percent in the past week, slipped 0.37 percent to 8.14 yuan.