SHANGHAI, Sept 22 (Reuters) - China stocks rebounded for the second day on Tuesday, in a further sign of improving investor sentiment that may help the market gradually stabilise after the rout since mid-June.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.9 percent, to 3,339.03, while the Shanghai Composite Index gained 0.9 percent, to 3,185.62 points.
China's volatility index, a gauge of investor fears, has dropped to 40 percent from an August peak of 64 percent.
But some analysts warn that the rebound could be temporary as valuations of small stocks are still high, and the Chinese economy has yet to find its feet.
China's President Xi Jinping told the Wall Street Journal in an interview that developing capital markets was a key goal of China's reforms, which will not change just because of current market volatility.
Most sectors ended the day higher but the CSI300 Infrastructure Index was down 0.1 percent.
Small caps reversed the losses in morning trade with Shenzhen's start-up board ChiNext gaining 0.2 percent at the close.
Brokerage shares, including CITIC Securities and Haitong Securities, jumped as investors bet securities firms would benefit from a possible market link-up between Shanghai and London as suggested by UK finance minister George Osborne in Shanghai on Tuesday. (Reporting by the Shanghai Newsroom; Editing by Jacqueline Wong)