China Shares End Flat; Shanghai Off 1.8% for the Week - Wall Street Journal

SHANGHAI--China's shares ended flat Friday as the lack of fresh impetus left the benchmark index trading in a narrow band close to three-year lows.

The Shanghai Composite, which tracks both A and B shares, edged up 0.1% to 2128.76 points while the Shenzhen Composite Index fell 0.5% to 876.26. The Shanghai index, which is off 1.8% for the week, hovered in a range of 2120.63 to 2158.95 amid a lack of signals that the worst for the domestic economy is over.

While other markets had rallied on European Central Bank President Mario Draghi's comments that the ECB would do whatever it takes to preserve the common-currency union, local traders said the Shanghai index will remain at a low in the short term.

"It is not surprising that we're seeing a slight rebound after this week's losses in the mainland market," said Zhang Yanbin, analyst at Zheshang Securities.

But the Shanghai Index is set to consolidate for a while more, said Wang Xiaojun, an analyst with China Minzu Securities, as the index broke several lows for the year this week.

"We saw a steep climb (for stocks) in the first and second quarters that is now being reversed because previous forecasts for growth rebounds were off," Mr. Wang added.

On Thursday, the benchmark finished at 2126.0 points, its lowest close since March 9, 2009, when the index ended at 2118.75.

However, blue-chip financials provided some support on Friday, as investors bargain hunted following recent losses in the sector.

"Sentiment (toward banks) seems to have swung to an extreme," said a research note by Credit Suisse.

The research firm said Chinese banks had underperformed the broader market since mid-2011 owing to concerns about asset quality, strength of loan demand and margin compression. But banking stocks have the potential to rally due to overselling, according to Credit Suisse. China Construction Bank is its top pick going into second-quarter reporting season. CCB closed up 1.6% at CNY3.93.

Bank of China was up 1.1% at CNY2.72, China Merchants Bank added 1.7% to CNY9.75 and Bank of Communications ended up 1.0% at CNY4.22.

As some investors chose to rotate slightly into riskier sectors, defensive stocks lagged the market. Liquor company Kweichow Moutai was down 0.4% to CNY249.45 while Tsingtao Brewery was off 0.03% to CNY35.95.

Write to Chao Deng at chao.deng@dowjones.com