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China: Shares end modestly up, weak factory activity curbs gains

[SHANGHAI] China stocks posted modest gains on Tuesday, as persistent signs of weakness in the economy and liquidity concerns reined in any feel-good mood generated by the International Monetary Fund's decision to grant the yuan reserve currency status.

After a volatile session, the blue-chip CSI300 index rose 0.7 per cent, to 3,591.70, while the Shanghai Composite Index gained 0.4 per cent, to 3,456.31 points.

Sentiment was restrained by weak factory activity data and upcoming new listings that threaten to sap short-term market liquidity.

Traders said that the IMF's decision to add the Chinese currency to its Special Drawing Rights (SDR) basket was long expected, and its impact to the mainland's stock market was neutral. "Theoretically, the move would make yuan assets more attractive to global investors over the long term," said Samuel Chien, partner of hedge fund house Shanghai Boom Trend Investment Management Co. "But on the other hand, there's also high expectation of further yuan depreciation as Beijing needs a weaker currency to support its struggling manufacturing sector." Real estate stocks jumped for the second day, as investors were attracted by the sector's low valuation, and the prospects of government support. "Next year, the government will stimulate domestic demand to support the economy and this will likely come from property and infrastructure as both are meaningful contributors to the economy," Jing Ning, portfolio manager at Fidelity International said.

Major developers, including China Vanke Co Ltd and Poly Real Estate, surged 10 per cent, the upward limit.

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But banking shares weakened, curbing gains in the benchmark index.


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