China stocks up 1.7 pct, but post 3rd weekly loss

SHANGHAI Fri Aug 21, 2009 3:28am EDT

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SHANGHAI Aug 21 (Reuters) - China's benchmark stock index closed up 1.7 percent in rising volume on Friday, led by banks after strong earnings reports, although they posted its third weekly loss in a row.

Investors have cashed out of the highly valued market since early August amid a wave of new share offers and weakness in overseas markets.

The Shanghai Composite Index .SSEC finished at 2,960.771 points on Friday, down 2.8 percent for the week.

Gaining Shanghai A shares outnumbered losers by 905 to 35, while turnover for Shanghai A shares rose to 137.4 billion yuan ($20 billion) from Thursday's 121.7 billion yuan.

The index ended well above the five-day moving average, now near 2,900 points, but analysts said it was still too early to say the index had convincingly breached that closely watched technical level.

More battles between buyers and sellers are likely if the index rises further next week and heads toward the 60-day moving average, now just above 3,000, they said.

"The psychologically important 3,000 point level will be crucial in the near term," said Zhang Xiang, chief strategist at Guotai Junan Securities. "See-saw battles are still inevitable next week as investor confidence needs time to recover."

He pointed to the index's dramatic 20 percent tumble in just two weeks to Wednesday's close before its technical bounce on Thursday and Friday.

On Friday, China's top lender Industrial & Commercial Bank of China (601398.SS), the most active stock, closed up 2.32 percent at 4.86 yuan after it posted forecast-beating second-quarter earnings. [ID:nPEK347672] (Reporting by Claire Zhang and Edmund Klamann; Writing by Lu Jianxin)

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