China shares end flat; market awaits more policy cues

SHANGHAI (Dow Jones)--China's shares ended flat Friday in cautious trading before Chinese authorities release economic data for June and the first-half period.

The benchmark Shanghai Composite Index, which tracks both A and B shares, ended up 0.1% at 2797.77, after trading in a narrow range between 2784.13 and 2807.38. The Shenzhen Composite Index fell 0.1% to 1201.50.

Analysts said the Shanghai index may continue to consolidate around the 2800 key level as investors need more cues from upcoming data to forecast whether China will continue the pace in monetary tightening.

"If the government thinks inflation had peaked in June or may ease in July, it doesn't have to hike interest rates. Still, I am afraid the latest move might not be the last rate hike of this cycle," said Li Xiaoxuan, an analyst with Shenyin Wanguo Securities.

The People's Bank of China announced a 25-basis-point hike in both benchmark deposit and lending rates Wednesday.

China's statistics bureau will release the June consumer and producer price indexes on Saturday. On July 13, the bureau will release gross domestic product data for the second quarter, as well as other data for June, including industrial output, non-rural fixed-asset investment and retail sales.

"We are waiting to see whether the PBOC will hike the reserve ratio for banks after the data," said Zhang Gang, an analyst at Southwest Securities. Zhang added if the central bank continues with its monthly reserve ratio hike then it suggests the country's tightening will remain at the previous pace.

Yu Xuejun, head of the China Banking Regulatory Commission's Jiangsu branch, was quoted as saying Friday that any loosening in monetary policy will undermine China's efforts in the past year to curb inflation.

Wine producers rose as their earnings are more resilient to economic cycles. Zhejiang Guyuelongshan Shaoxing Wine increased 3.9% to CNY11.60, and Chongqing Brewery was up 1.1% to CNY67.49.

Air carriers fell on profit-taking after recent gains. China Southern Airlines ended down 2.4% at CNY8.27 after rising 9.1% in the previous five sessions, while Air China shed 0.2% to CNY10.20 following its 8.7% gain in the previous four sessions.

The July 2011 index futures contract, the most actively traded of the four index futures contracts traded in China, ended 0.4% higher at 3113.8.

The futures are referenced to the CSI-300, an index of 300 Shanghai- and Shenzhen-listed yuan-denominated A shares. The CSI-300 was 0.2% higher at 3109.18.

-Wynne Wang contributed to this article, Dow Jones Newswires; (86-21) 6120-1200; wynne.wang@dowjones.com