Most Chinese shares rose on Thursday, with Aluminum Corp of China (Chalco) soaring 10 percent, though the main index was pulled down by weakness in banks and oil refiners. The Shanghai Composite Index closed down 0.11 percent at 2,901.850 points, well off an intra-day low of 2,851.116, after jumping 3.64 percent on Wednesday.
Gaining Shanghai stocks outnumbered losers by 640 to 229, with over 15 Shanghai A shares up their 10 percent daily limits. Turnover in Shanghai A shares was 68.9 billion yuan ($10.0 billion), still modest but up from Wednesday's 67.2 billion.
Industrial & Commercial Bank of China sank 2.08 percent to 5.17 yuan, and refiner Sinopec slid 2.16 percent to 11.30 yuan, on profit-taking after they rose sharply on Wednesday.
But Chalco jumped in the last 90 minutes of trade, closing up its 10 percent daily limit at 14.19 yuan in its heaviest turnover for a month. This pulled up other non-ferrous metals producers such as Jiangxi Copper, which gained 4.09 percent to 23.90 yuan.
Some mutual funds have been buying blue chips in recent days on the grounds that valuations have dropped to reasonable levels, and they apparently targeted Chalco on Thursday, traders said. It had tumbled from an end-May level of 19.20 yuan, partly because of a profit warning.
Several analysts expressed surprise at Chalco's leap, noting that given the chance of more power price hikes and the possibility that aluminium export tax rebates may be cut, the company could face fresh pressure on its earnings.
Zhou Lin, analyst at Huatai Securities, said bank shares were apparently hit by growing speculation in Chinese markets that the central bank could hike interest rates soon to fight inflation.
"The market is getting stronger and it is on the way to test 3,000 points, but it may consolidate for at least a few days now - good news is being mixed with continued worries, such as a rate hike," he said.
"The confidence of investors will only be restored gradually. Pressure from profit-taking will limit any rebound in the near future," said Zhang Qi, analyst at Haitong Securities.