Shanghai's composite index, grouping A and B shares, ended up 21.082 points, or 1.40 percent at 1,531.842 while the Shenzhen sub-index also gained 56.68 points, or 1.869 percent to end at 3107.24 yesterday.

Shanghai's hard currency B share index closed up 2 percent at 131.872 points while Shenzhen's rose 2.08 percent to 203.81 after a nine-week downtrend.

Turnover in B shares, available to both foreign and Chinese investors, rose slightly but remained thin at US$10.48 million in Shanghai and HK$82.23 million (US$10.54 million) in Shenzhen.

"Investors believed more foreign participation will help the development of the stock market," said Zheng Weigang, a senior analyst with the Shanghai Securities.

"We expect share indices to continue rising steadily, but slowly, over the next one or two weeks, also due to a technical rebound after the downtrend of the past few weeks," he said.

Chinese regulators said yesterday listed companies could sell non-tradable state shares and institutional shares to foreign parties by public tender, ending a seven-year ban.

The new ruling is aimed at attracting foreign capital to boost the quality of more than 1,200 firms listed in China.

Chinese-only A shares in Shenzhen Development Bank, which plans to sell State-held stakes totalling nearly 20 per cent to US private equity fund Newbridge Capital, outperformed the underlying index to close 3.49 percent higher at 13.36 yuan.

Shanghai's A share index ended up 1.38 percent at 1,600.347 points, while its Shenzhen counterpart rose 1.51 percent to 472.14. A shares are off limits to foreigners.

Investors also bought into telecoms firms that had fallen sharply in the recent downtrend due to disappointing results.

Telecoms gear maker Nanjing Putian Telecommunications Co was the biggest B share gainer, closing up 5.88 percent at HK$4.50.

Brokers said they expected more gains ahead of the Chinese Communist Party's 16th National Congress starting on Friday at which the party is expected to reshuffle its top leadership.

"As the Party Congress is drawing near, we expect share indices to mostly stay in positive territory," said analyst Cheng Dong of the MF Securities.

"But as trade has remained thin recently, we think it will be difficult for the indices to break through major resistance."

Brokers said regulators had held meetings to urge institutional investors, including brokerages and funds, to "create a good market atmosphere for the Party Congress", although regulators did not issue instructions to buy shares.

Analysts said they saw near-term resistance for the benchmark Shanghai composite index at about 1,550 points.

China's shares have fallen nearly 10 percent since early September, hit by a raft of worries ranging from low volumes and an official crackdown on corruption to a long list of companies waiting to go public.

(China Daily November 5, 2002)