China stocks traded sideways on Friday but managed to end the session slightly up, as strength in infrastructure shares offset concerns rooted in continuing yuan weakness. The bluechip CSI300 index rose 0.3 percent, to 3,327.80 points, while the Shanghai Composite Index gained 0.2 percent, to 3,091.29 points. For the week, CSI300 was up 0.7 percent, while SSEC gained 0.9 percent.
Infrastructure-related stocks rose sharply, after China issued rules for management of government funds used in private-public partnership (PPP) projects, many of which are for infrastructure work. The sector was also helped by improving ties between China and Philippines, which bodes well for Beijing's strategy to win construction work in other countries.
That helped offset drags from the real estate sector, as well as negative impact from a weakening yuan. China's yuan slipped against the dollar on Friday to a fresh six-year low, as strong dollar purchases by companies continued piling pressure on the Chinese currency. Bucking Friday's trend, construction stocks including China Communications Construction, Power Construction Corp of China and China Railway Construction rose sharply. Analysts said the sector should benefit from an acceleration in infrastructure investment and yuan depreciation.
"Further yuan depreciation, which many people expect, is good for exporters, but it will also have a negative psychological impact and curb risk appetite," said Yang Hai, analyst at Kaiyuan Securities. "I don't see a big trend forming, either upward or downward. The market will likely to remain rangebound in the fourth quarter," he said.
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