SHANGHAI (Dow Jones)--China's shares ended higher Tuesday alongside gains in regional markets as investors once again pinned their hopes on stimulus help from Beijing, although thin trading volumes suggested that the day's rebound may be short-lived.
The benchmark Shanghai Composite Index finished up 1.1% at 2373.31, near the highs of the session. The index is likely to trade within a 100 point range in the near term with 2400 being a key psychological resistance level, say analysts.
The Shenzhen Index closed up 1.5% to 955.70.
Premier Wen Jiabao's pro-growth policy comments from the weekend helped the market add to its 0.2% gain from Monday. Strong performance in Asian markets also lifted sentiment, with the Hong Kong's Hang Seng index climbing 0.6%.
The gains were across sectors in China, including infrastructure, railways and energy, all of which are expected to benefit from potential government investments and policy reforms.
Cement stocks led the way with Anhui Conch Cement gaining 3.4% to CNY16.67 and Fujian Cement up 3% at CNY8.23.
Other actives included Qingdao Haier, up 1% at CNY12.15, and Gree Electric Appliances, up 1% at CNY21.95. China Railway Group jumped 2.2% to CNY2.74.
Property stocks also climbed as investors expect the government to encourage genuine demand in less speculative segments of the real estate market such as social housing, all the while still keeping its grip on runaway prices.
China Vanke climbed 3.9% to CNY9.01 and Poly Real Estate was up 5.4% at CNY13.41. The Shanghai property subindex gained 2.9%.
Despite a seemingly solid finish for the broader market, only 75.4 billion shares changed hands on the Shanghai bourse, indicating that some of the gains came from short covering. A volume of 70 billion shares was reached on Monday and 79.0 billion last Friday in Shanghai.
"Trading usually has to reach 100 billion shares for sustained upside," Huang Zhen, an analyst with Western Securities, adding that another sign the rebound is weak is that it has been too dependent on a bounce in stocks that have slumped in recent weeks.
Analysts say an imminent pullback may be in store as questions remain over whether future policy changes from Beijing can meet investor expectations and how the eurozone debt crisis will unfold.
"Further clarity on Greece's future in the eurozone won't come until after the country's elections around the middle of June, so downside is expected in the medium term," says United Securities analyst Pei Xiaoyan.
-By Chao Deng, Dow Jones Newswires; 86-21-6120-1200; chao.deng@dowjones.com
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