Chinese stocks rebounded on Wednesday as blue chips were bought across the board after slightly better-than-expected consumer price inflation data.
But while turnover rose, it remained thin, and analysts said it was not clear that any extended recovery of the stock market was starting, given concern about slowing corporate profit growth and heavy supply of fresh equity.
"The CPI number helped, and the index has dropped so fast recently that it's not surprising to see a rebound. But we're not sure how long the rebound can last," said Li Wenhui, analyst at Huatai Securities.
The Shanghai Composite Index dropped to a new 20-month intra-day low of 2,102.906 points in early trade but ended the morning up 1.06 percent at 2,168.585 points after the release of the data.
Turnover in Shanghai A shares rose to 16.4 billion yuan ($2.41 billion) from 11.1 billion yuan in the morning on Tuesday, when full-day turnover hit its lowest level since October 2006. Gaining Shanghai shares outnumbered losers by 805 to 110.
Annual consumer price inflation fell to a 14-month low of 4.9 percent in August from 6.3 percent in July, the government said. It was the lowest reading since 4.4 percent in June 2007, and below economists' consensus expectation of 5.3 percent.
However, producer price inflation rose to 10.1 percent in August from 10.0 percent in July, exceeding forecasts of 9.8 percent.
The gap between consumer price inflation and higher producer price inflation threatens to erode the profit margins of many industrial companies, analysts say.
