China Shares End Flat; Concerns Over Domestic Economy to Persist - Wall Street Journal

SHANGHAI--China shares ended flat Tuesday as bargain hunting in financial plays helped offset the effect of a fall in regional equities which were dragged down by doubts over Europe's ability to deliver decisive measures to address its continuing debt crisis.

The benchmark index spent most of the session in negative territory as investors remained pessimistic about the outlook for the domestic economy, analysts said.

"It's expectations that economic data for June won't look good that really prompt investors to sell these days," said Capital Securities analyst Jacky Zhang, adding that concerns over Europe--especially following Moody's overnight downgrades of Spanish banks--weigh on sentiment.

"Investors have turned their focus to company fundamentals as well as earnings outlooks to see whether the shares are really worth buying. That's why we've been seeing a bout of selling recently as those stocks are overvalued," says Minsheng Securities analyst Zhang Lei.

Despite recent measures to spur growth, investors are still waiting to see if more industry-specific policies will be introduced to boost domestic demand, which should be the real driver for economic growth, Minsheng Securities' Zhang said.

The benchmark Shanghai Composite Index, which tracks both A and B shares, ended flat at 2222.07. The Shenzhen Composite Index also ended flat at 918.24.

Analysts said the Shanghai index may consolidate with a downward bias in the coming sessions on chart-based cues with a nearby support at 2132 as concerns over the domestic economy likely persist.

The Shanghai index briefly entered positive territory in the early afternoon as financial plays bucked the trend on bargain-hunting after a sharp decline in the previous session. Everbright Securities Co. was up 2.1% at CNY12.56; GF Securities Co. rose 2% to CNY29.01; Huatai Securities Co. gained 1.9% at CNY10.22.

Coal miners were among the losers as they tracked overnight falls in oil futures. Yanzhou Coal Mining (600188.SH) was down 5.4% at CNY19.61, China Shenhua Energy (601088.SH) fell 0.7% to CNY22.45 and China Coal Energy Co. lost 0.6% to CNY7.91.

The July index futures contract, the most actively traded of the four index futures contracts traded in China, ended down 0.3% at 2461.0.

The futures are referenced to the CSI-300, an index of 300 Shanghai- and Shenzhen-listed yuan-denominated A shares. The CSI-300 ended flat at 2454.92.

Write to Yue Li at yue.li@dowjones.com