China shares end up 1.8 pct on earnings, technicals

SHANGHAI, Aug 26 - China's benchmark stock index closed up 1.8 percent on Wednesday, after index heavyweights such as flagship carrier Air China posted better than expected earnings while technical charts pointed to a rebound.

But analysts said the scope for the rally should be limited in the near term, partly due to uncertainties surrounding how fast China's economy is recovering and when the government will adjust its relatively easy money policy.

"Sluggish trading will limit the index's rebound to only a maximum of 100 points," said Central Securities stock strategist Zhang Gang in Shanghai. Compared with Wednesday's close, that would only be a rise of slightly more than 3 percent.

The Shanghai Composite Index closed at 2,967.595 points while Air China soared its daily 10 percent limit to 7.92 yuan after saying its net profit in the first half jumped 155 percent..

Investors also looked ahead to firms that may post strong earnings. Top auto maker SAIC Motor, which will report interim results later in the day, finished up 8.55 percent at 18.65 yuan.

Gaining Shanghai A shares overwhelmed losers by 827 to 50 on Wednesday, but turnover for Shanghai A shares fell to a relatively thin 143 billion yuan ($21 billion) from Tuesday's 160 billion yuan.

Wednesday's rally came after the index successfully established a double bottom on the charts on Tuesday, when it tumbled in intraday trading but managed to finish above the five-day moving average around 2,900 points.

That set the stage for a technical rebound and will allow the index to head for the next resistance level at the 60-moving average, now around 3,060, in coming weeks, analysts said. ($1 = 6.83 yuan)