China stocks extended their gains on Tuesday, led by technology, consumer and financial stocks, as risk appetite improved on signs the government will relax monetary and fiscal policies to counter the impact of Sino-US trade friction. Investors also drew solace from a media report that China's major insurers have invested billions of Chinese yuan in the stock markets in the past three trading days in bargain hunting activities.
The blue-chip CSI300 index ended 1.8 percent higher at 3,326.65, while the Shanghai Composite Index closed up 1.3 percent at 2,733.83 points. "It's clear the government is relaxing policies. There's ample liquidity ... and Beijing is stepping up infrastructure investment," said Gao Ting, head of China Strategy, UBS Securities. He expects the rebound to last for a few months, but warned the market could resume its fall if the Sino-US trade friction escalates further.
China is likely to cut banks' risk weighting for local government bonds from 20 percent to zero in the near term to attract funding for the bonds, the state-run China Securities Journal reported on Tuesday. The move, if confirmed, would make it easier for local governments to raise money for infrastructure investment. The CSI300 financial sector sub-index closed 1.2 percent higher, the consumer staples sector ended 3.98 percent firmer, the real estate index closed up 1.39 percent and healthcare sub-index ended 4.36 percent higher.
The smaller Shenzhen index ended up 1.39 percent and the start-up board ChiNext Composite index closed 1.48 percent higher.
Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.64 percent, while Japan's Nikkei index closed up 0.09 percent.
The largest percentage gainers in the main Shanghai Composite index were BEH-Property Co Ltd, which ended 10.13 percent higher, followed by Shanghai Aerospace Automobile Electromechanical Co Ltd, which closed 10.05 percent higher and Anhui Great Wall Military Industry Co Ltd, which ended up 10.04 percent.
The largest percentage losses in the Shanghai index were MeiDu Energy Corp, which ended down 10.09 percent, followed by Gansu Gangtai Holding Group Co Ltd, which closed 10.02 percent lower and Shangying Global Co Ltd , which ended down 10.01 percent.
So far this year, the Shanghai stock index is down 17.3 percent, the CSI300 lost 17.5 percent, while China's H-share index listed in Hong Kong slipped 8.2 percent. Shanghai stocks lost 4.96 percent this month.
About 11.36 billion shares were traded on the Shanghai exchange, roughly 83 percent of the market's 30-day moving average of 13.69 billion shares a day. The volume in the previous trading session was 11.08 billion.
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