China stocks rebounded on Thursday morning after another bout of volatility in the session, as investors remain wary of further corrections even as a flurry of support measures from Beijing have managed to restore some calm.

Investors were also keeping a close watch on the futures markets where some traders appear to be betting on more falls for mainland stocks, which lost a third of its value in the recent month-long rout.

After moving in and out of negative territory, the CSI300 index rose 1.3 per cent, to 4,019.88 points at the close of morning trade, while the Shanghai Composite Index gained 1.0 per cent, to 3,843.35 points.

Following the previous session's slump, index futures for July delivery rose sharply ahead of Friday's settlement.

Index futures, which offer investors a tool to hedge risks and make directional bets, are being closely watched by investors as a gauge of market sentiment.

Stocks are typically more volatile just before the monthly settlement day for futures contracts, as futures speculators would seek to move spot prices in their favour to avoid a loss, analysts say.

Small caps were most volatile in the session.

Shenzhen's start-up board ChiNext was down over 4 per cent at one point, but erased losses to end the morning up 1.8 per cent.

The defence sector recovered solidly and there are signs investors are starting to favour more cyclical sectors, such as transport, real estate and infrastructure.

But the CSI300 bank index lost 1.6 per cent by midday.

"It seems that the market is currently more robust than expected with investors favouring again more speculative sectors," wrote Gerry Alfonso, director at brokerage Shenwan Hongyuan Securities Co.

Bucking the trend, shares of Hundsun Technologies Inc , which is controlled by Alibaba founder Jack Ma, slumped 6.6 per cent.

The company, which operates a trading platform for asset managers, said it will halt the opening of new accounts and ban new money flows into existing accounts, days after regulators launched a probe into its role in grey-market margin financing.

CITIC Securities also underperformed the broader market, ending the morning flat, after saying that China Life Insurance Co Ltd sold 30 million shares in the brokerage last Friday.

In Hong Kong, the Hang Seng index was unchanged at 25,064.43 points, while the Hong Kong China Enterprises Index gained 0.2 per cent, to 11,705.25.

Ben Kwong, a director at KGI Asia in Hong Kong, said the market was consolidating with investors closely watching the volatile China market for direction, while developments in Greece were also on their radar.

"The market remained very cautious with players taking a very short term view on trading when there was no positive news to boost the market."

Related Topics