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[SHANGHAI] China stocks steadied on Tuesday following a sharp sell-off the previous session.
Persistent weakness in small-caps offset gains in defensive stocks, showing investors were growing cautious over tougher regulation.
The blue-chip CSI300 index rose 0.3 per cent, to 3,440.97 points, while the Shanghai Composite Index gained 0.2 per cent to 3,134.57 points.
Yang Hai, strategist at Kaiyuan Securities, described the rebound, which came after the market's over 1 per cent drop on Monday - the biggest percentage loss for the year - as "technical" in nature.
"The market bounced after being over-sold," Mr Yang said, attributing the recent weakness to regulatory tightening.
"The regulatory crackdown on shadow banking is targeting mainly the banking system, not the stock market, but equities have been implicated." Analysts also cited the securities regulator's crackdown, which has driven money into cash-rich blue-chips.
The official Xinhua News Agency said late on Monday that the new draft of China's securities law would tighten rules preventing insider trading and better protect investors.
Stocks expected to benefit from the Xiongan New Economic Zone rose sharply but gave back much of their gains in the afternoon, as investors again showed wariness over the stricter regulatory environment.
Sector performance was mixed, with consumer stocks outperforming the broader market with a 3 per cent rise, as investors sought defensive plays amid bearish trends elsewhere in the market.