China stocks soar on policy support hopes

[SHANGHAI] China's stock markets surged on Friday before a long holiday weekend, with investor sentiment boosted by hopes that a government effort to boost domestic demand could help offset effects of an escalating trade war.

At the close, the blue-chip CSI300 index rose 3.0 per cent, its biggest one-day gain since May 2016, to end at 3,410.49 points.

The Shanghai Composite Index gained 2.5 per cent to 2,797.48 points. It was the Shanghai index's best week since March 2016.

"Investors are hunting bargains in banking and real estate stocks which are trading at low valuations," said Chen Xiaopeng, an analyst with Sealand Securities, adding that any impact from US-China trade frictions were already priced into the market.

Mr Chen said that market participants also cheered news of new State Council guidelines on improving domestic consumption, which helped lift consumer firms.

A detailed document issued late Thursday by the State Council, China's cabinet, ordered policies and resources to be geared towards sectors including tourism and sports to help give a broad-based boost to domestic consumption.

A sub-index of the CSI300 tracking consumer staples ended 3.6 per cent higher on Friday, while the financial sector sub-index soared 3.78 per cent, the real estate index jumped 4.45 per cent and the healthcare sub-index ended 2.31 per cent higher.

The smaller Shenzhen index ended up 1.77 per cent up and the start-up board ChiNext Composite index was higher by 1.69 per cent.

Strength in China's stock markets was matched by strength in the yuan, which was on course for a rare weekly gain, buoyed by an easing dollar.

At 0720 GMT, the yuan was changing hands at 6.8353 per US dollar, 107 pips stronger than the previous day's onshore close of 6.8460 per dollar.

The largest per centage gainers in the main Shanghai Composite index on Friday were Shenzhen Geoway Co Ltd, Air China Ltd and China Sports Industry Group Co Ltd, all of which rose by the 10 per cent daily limit.

Despite the rally, both the Shanghai stock index and the CSI300 are down 15.4 per cent for the year, while China's H-share index listed in Hong Kong has fallen 5.5 per cent. Shanghai stocks have risen 2.65 per cent this month.

REUTERS