SHANGHAI (Dow Jones)--China's shares ended higher Wednesday, as property developers gained on expectations of further easing policies from the government while start-up companies listed on the ChiNext board rebounded after recent sharp losses.
The benchmark Shanghai Composite Index, which tracks both A and B shares, ended up 0.8%, or 17.98 points, at 2406.81. The Shenzhen Composite Index rose 0.9% to 944.65.
Retail investors piled into property stocks even as Chinese property developers reported slower earnings growth, because investors expect Beijing to ease its grip on the housing market amid the economic slowdown.
"Monetary policy always trumps earnings in determining the direction of the stock market," said Everbright Securities analyst Teng Yin.
Property developers, which have been the focus of China's monetary tightening in the past two years, were among the top picks of fund managers during the first quarter, the state-run China Securities Journal reported Wednesday, citing its own statistics.
But Teng said he remained cautious about housing stocks. "Corporate profits in the real estate sector may decline in the medium to long term," he said.
Gree Real Estate surged by the 10% daily limit to CNY6.71, Shanghai Xinmei Real Estate also rose by the 10% daily limit to CNY8.37, and China Vanke ended 2.9% higher at CNY8.88.
Although the market rebounded Wednesday, analysts said the broader market is still likely to continue to consolidate in the coming days due to a lack of policy catalysts.
"Investors are still wavering on either side of the 2400 level of the Shanghai index. More funds are needed to drive the market higher. For example, the trading volume in the two stock exchanges should reach at least CNY270 billion a day. But it looks difficult," said Qian Qimin, an analyst at Shenyin Wanguo Securities.
Small-capitalized companies listed on the ChiNext board were among the day's biggest gainers after recent sharp falls. Chenguang Biotech Group soared by the 10% daily limit to CNY12.65 following a 7.8% fall in the previous two sessions, and Beijing Century Real Technology gained 5.2% to CNY18.49 after shedding 6.6% over the same period.
But Everbright Securities' Teng said the rebound might fizzle out soon as the downtrend for these companies is underway.
The Shenzhen Stock Exchange, the smaller of China's two bourses, Friday amended its delisting rules for start-up firms on its ChiNext board, tightening the criteria that these companies have to satisfy in order to be traded.
-Chao Deng and Rose Yu contributed to this article, Dow Jones Newswires; 8621 6120-1200; rose.yu@dowjones.com
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