SHANGHAI--China's shares ended slightly up Tuesday led by brokerages and property companies, but analysts said downward pressure remains because of increasing risks of poor corporate earnings and tight liquidity conditions.
The benchmark Shanghai Composite Index, which tracks both A and B shares, ended up 0.6%, or 13.23 points, to 2161.19. The Shenzhen Composite Index rose 0.5%, or 4.41 points, to 893.51.
However, trading volume in the two exchanges fell to 105.7 billion yuan (US$16.6 billion) from CNY134 billion Monday.
"It's just a technical rebound and the downtrend for the market remains intact," said Hong Yuan Securities analyst Tang Yonggang. "Recent profit warnings from listed companies have highlighted the uncertainties in China's economy," he said.
"It's difficult to predict where the bottom is. But I feel the bearishness will continue unless some surprise policies, like tax breaks, are rolled out," said Mr. Tang.
In addition to the poor sentiment on China's economy and its companies, demand for China shares is also subject to tight liquidity conditions as funds will be diverted to pay for a huge amount of the People's Bank of China's reverse repurchase agreements due this week, said Li Xiaoxuan, a Shenyin Wanguo Securities analyst.
A slew of new stock offerings will also stir investor interest, said Ms. Li.
The PBOC injected CNY373 billion into the banking system via reverse repos over the past three weeks. About CNY205 billion worth of reverse repos will mature this week. The number of companies taking orders for their IPOs rises to eight this week from three last week.
Brokerages led the market's gains as data from China's securities association show that 79% of the country's 112 brokerages posted a profit for the first half despite an uninspiring market. The benchmark Shanghai index rose only 1.2% in the January-June period.
Among big gainers were Hong Yuan Securities, which surged 6.5% to CNY18.14, and GF Securities, which jumped 4.6% to CNY15.45, because both are expected to benefit from the regulator's drive to develop new businesses, such as margin trading and short selling, among brokerages, analysts say.
Property developers also gained in active trade following Monday's sharp fall. Cofco Property surged by the 10% daily limit to CNY4.42 following a 6.1% decline Monday while China Merchants Property added 2.1% to CNY25.80 after a 3.4% drop.
Among big losers, ship maker CSSC Jiangnan Heavy Industrial fell 5.1% to CNY15.62 after saying it expects to post an 80% drop in first-half net profit, and ZTE slid 2.8% to CNY11.39 after a 10% plunge on Monday due to the residual impact of its warning of an up to 80% fall in first half net profit.
Write to Rose Yu at rose.yu@dowjones.com
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