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China Stocks Set to Tread Water Ahead of Holiday

The Chinese market is expected to trade cautiously ahead of the long weekend — markets will be closed on Friday for the Dragon Boat Festival.

China
AP
China

The Shanghai Composite Index gave up 0.66 percent to finish at 2,300.8 on Tuesday, the first down day in three.

Market Factors:

China's funds outstanding for foreign exchange rose 23.4 billion yuan ($3.7 billion) in May, reversing April's drop, in a reflection of the yuan's depreciation last month and the stronger-than-expected trade activity. Analysts expect funds outstanding for exchange in 2012 to fall significantly from last year, and give Beijing more room to cut the reserve requirement ratio.

Ten provinces and cities have recently issued 2012 wage rise guidelines for enterprises, the increases range from Beijing's 11.5 percent to Xinjiang's 16 percent. While the guidelines are not enforceable, they can be used as the basis for collective bargaining.

Stocks to Watch:

Guyue Longshan - The liquor maker said its wines have not been taken off shelves at Wal-Mart Stores' stores in China, contrary to media reports. Guyue Longshan has been defending its rice wines after Hong Kong's Consumer Council charged the products have a probable cancer link.

China Unicom - The telecommunications giant said it grew 3G subscribers by 5 percent in May to 54.5 million.

—By Cheng Lei, CNBC Asia Pacific