HONG KONG (Dow Jones) - Brilliance China Automotive Holdings Ltd.'s (CBA) shares are rebounding from their recent heavy losses yesterday on bargain-hunting and as investors see hope for an early resolution to a stake sale battle.

At 0729 GMT (Bermuda time 0329), Brilliance China was up 3.5 percent to HK$1.65, reversing some of its recent weakness, while the benchmark Hang Seng index was down 1.0 percent to 9165.64.

Yang Rong, Brilliance China's former chairman, is using a Bermuda court to challenge the company's transfer of a 39.45 percent stake in the firm, owned by the Chinese Financial Education Development Foundation, to the Liaoning provincial government.

The market views the stake transfer, proposed by the provincial authority in December, as positive as it would clarify Brilliance China's ownership structure and help clear the way for a planned joint venture with German automaker Bayerische Motoren Werke AG (G.BMW).

Brilliance China's shares had lost 16 percent between January 22, when the Bermuda Supreme Court issued an order freezing the stake transfer, and the start of trading yesterday as concerns over the dispute weighed on the stock.

The mainland China minibus maker, registered in Bermuda, said yesterday the court has decided to proceed with a hearing on the matter on Friday, after receiving evidence from Brilliance China on Tuesday.

"Despite their (Yang and his legal representative's) request for a further ten-day postponement for preparation, the judge has decided to hold the hearing on February 7," Brilliance China spokeswoman Elsie Chan said, declining to comment on the case.

Thursday marks the closing date for minority shareholders to accept the Liaoning provincial government's conditional general offer to buy Brilliance China stock at 10 HK cents a share.

This represents a 94 percent discount to the share's yesterday morning closing level of HK$1.68, and analysts believe it is unlikely any minority shareholders will accept the offer.

"We believe we will be able to clear all major obstacles to the deal within this week," Chan said. Yang's lawyer wasn't immediately available for comment.