[SHANGHAI] China stocks rebounded on Thursday from the previous session's sharp correction, but high trading volatility reflects lingering investor caution even as Beijing's flurry of rescue measures has managed to stem panic selling.
Investors were also keeping a close eye on the index futures market, where traders are generally still betting on more falls for mainland stocks, which lost about one-third of their value in the recent month-long rout.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.8 per cent, to 3,997.36, while the Shanghai Composite Index gained 0.5 per cent, to 3,823.18 points.
Index futures also rebounded sharply after Wednesday's slump, but many contracts still trade below their underlying indexes.
At the close of session for stocks, for example, the CSI300 futures contracts for August delivery, traded at around 3850 points, nearly 150 points below the CSI300 index. That partly reflects bearish bets on the market performance over the next month.
Stock index futures, which offer investors a tool to hedge risks and make directional bets, are being closely watched by investors as a gauge of market sentiment.
Volatility was high on Thursday, which some analysts attributed to Friday being the settlement day for the futures contracts for July delivery.
Shenzhen's start-up board ChiNext was down over 4 per cent at one point, but erased losses to end the day up 1.2 per cent.
The defense sector recovered solidly and there are signs investors are starting to favor more cyclical sectors such as transport, real estate and infrastructure.
But the CSI300 bank index lost 1.7 per cent.