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Tuesday, February 23, 2016, 15:26

Mainland stocks pull back after rally

By Reuters

SHANGHAI - China stocks fell on Tuesday as investors took profits from the previous session's 2 percent gain, but some analysts expect buyers to return ahead of the annual meeting of China's top legislature next month.

The blue-chip CSI300 index fell 1.0 percent to 3,089.36 points, while the Shanghai Composite Index lost 0.8 percent to 2,903.33.

Most sectors fell but resources and energy shares extended their recent rally on a global pick-up in commodity and oil prices.

At the National People's Congress, China's leaders will deliver work reports and the government's next five-year economic development plan will be finalised. Specific business sectors are often singled out for expansion.

The meeting will begin on March 5.

By the lunch break, both the blue-chip CSI300 index and the Shanghai Composite Index lost 1.3 percent, to 3,079.10 points and 2,890.29 points, respectively.

Some analysts say China's four-week market rebound, which saw main indexes bounce roughly 10 percent from their late January low, will likely continue, replicating a typical trading pattern ahead of the gathering of the NPC.

China's top leaders pledged on Monday to keep economic growth within a reasonable range this year, although the statement was general and broad.

"This time, the spotlight will be on policies to further reduce capacity as part of the government's supply-side reforms," said Yang Hai, strategist at Haiyuan Securities.

"In addition, there's now less yuan depreciation pressure, which means China can take a more proactive approach to liquidity easing."

Yang's view was echoed by Shanghai Million Tons Asset Management Co, who said the market is in a "window of opportunity for trading."

In a note to clients, the hedge fund house said that it would take time for the real economy to respond to a series of consolidation measures targeting sectors including steel, coal and refineries, but the stock market is a harbinger of what is to come.

On Tuesday morning, all main sectors lost ground, but resource shares, which have recently rebounded sharply on a global pick-up in commodity prices, were only down slightly, outperforming the broader market.

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