Chinese shares surged to another record high Tuesday on strong demand for heavyweight banks, but Shanghai's key index lost some of its early gains on selling of blue chips, and the smaller Shenzhen market declined. The yuan was steady against the U.S. dollar in slow post-Christmas trading.
The Shanghai Composite Index gained 1.8 percent to 2,479.73, another record closing high, after hitting 2505.70 during the day.
The index has more than doubled in value since the start of the year on strong liquidity.
The Shenzhen Composite Index edged 0.7 percent lower to 539.77.
The pending share listing by China Life, the country's No. 1 life insurer, is helping support demand, analysts said. China Life is due to begin trading by Jan. 11. It set an IPO price range of 18.16-18.88 yuan (US$2.32-US$2.41; euro1.77-euro1.84) per share, for an offering of up to 1.5 billion shares that could raise up to 28 billion yuan (US$3.6 billion;euro2.8 billion).
"Although profit-taking risks are pretty high, the market is unlikely to slump before China Life's listing," said Chen Huiqin, an analyst at Huatai Securities.
Expectations that the insurer will make a strong debut have fanned interest in other financial shares such as Industrial & Commercial Bank of China and Bank of China, analysts said.
"ICBC and BOC are meeting with strong demand from securities funds. Fund managers widely regard the two industry leaders as must-haves for their portfolios," said Kang Haoping, an analyst at Jutian Securities.
Improving market conditions have attracted several securities funds to China in recent months and many funds are under deadlines to build up their portfolios, analysts said.
ICBC, mainland China's biggest listed company by market capitalization, gained 5.8 percent to 5.51 yuan after surging 9.9 percent a day earlier. BOC, the second-largest, rose 2.3 percent to 4.40, on top of a 7.5 percent gain Monday.
Yet some blue chips fell on profit-taking.
Shanghai Pudong Development Bank shed 1.2 percent to 18.14 after jumping 5.6 percent the day before. China International Marine Containers (Group) lost 3 percent to 17.80 after gaining 3.2 percent a day earlier, and China Yangtze Power lost 1.7 percent to 8.75 after gaining 2.4 percent Monday.
"The fever for blue chips is calming down. Investors may now refer to listed companies' growth prospects for investment cues," said Huatai's Chen.
In currency dealings, the dollar was at 7.8205 around 0730 GMT on the over-the-counter market, down from Monday's close of 7.8220.
Comments by a top central bank official suggesting that China is considering diversifying the investment pool for its more than US$1 trillion in foreign exchange reserves had little impact, traders said.