China's key stock index closed 1.4 percent higher on Tuesday, bouncing from a fresh one-year intraday low hit during the morning as property and banking stocks staged a technical rebound. In Hong Kong, shares extended gains in the afternoon session, bouyed by a rebound in Chinese equities markets. Beaten down shares such as Esprit Holdings and HSBC bounced back as investors sought bargains.
The Shanghai Composite Index ended the session at 2,594.8 points, regaining its footing after the previous day's 5 percent slide - its biggest one-day percentage drop in more than eight months - as retail investors fled the market. The property subindex jumped 5.6 percent, with China State Construction Engineering Corp, the day's most actively traded share, rising 4.6 percent while Gemdale Corp, the second most-active, rose its 10 percent daily limit.
Sector heavyweight China Vanke was the most actively traded stock on Shenzhen market, jumping 6.1 percent. Several analysts said the index could manage a bounce as high as the psychologically key 2,700 points, barring the emergence of further negative news. But analysts also warned that the market may remain weighed down by retail investors' worries about Chinese economic policy steps, especially measures to cool the property market, where the outlook remained uncertain.
"Investors lack confidence in the market now," said Wen Lijun, an analyst at Nanjing Securities. "And there's no positive news to support the market after yesterday's drop." Gaining Shanghai A shares outnumbered losers 610 to 241 but turnover remained light, falling to 84 billion yuan ($12.30 billion) from Monday's 87 billion yuan.
The Shanghai index's 14-day relative strength index was at 27, remaining below the 30 mark that indicates a market has become oversold. The June contract for the country's new stock index futures, which has taken over from the nearby May contract as the most active, ended 3.0 percent higher after rising as much as 4.4 percent in intraday trade.
Hong Kong's benchmark Hang Seng index ended the day up 1.2 percent, or 229.74 points, at 19,944.94, rebounding from the lowest closing level in more than three months the previous session. The index was down 8.8 percent from a month ago.
"There is no solid direction yet. Even though the Hang Seng Index is up, turnover is thin, which means investors are still cautious and prefer to stay on the sidelines," said Andy Lam, strategist at Harris Fraser (International) Ltd. The HSI will likely trade at between 19,700 and 20,100 for the rest of the week, Lam said. Turnover dropped to a two-week low of HK$57.7 billion ($7.4 billion) from Monday's HK$67.1 billion. The China Enterprises Index of top locally listed mainland companies was up 1.7 percent.
Index heavyweight HSBC added 1.5 percent, reversing a 6 percent decline in the last three sessions. Europe-focused fashion retailer Esprit rose 5.1 percent, rebounding from a 16 percent drop in the last three sessions on concerns that sharp cuts in government spending in Europe will slow growth in the area, hurting overseas sales. Chinese banks also bounced from recent lows, with Industrial and Commercial Bank of China up 2.5 percent.