SHANGHAI: China stocks ended higher on Tuesday, as the central bank’s liquidity injection eased worries over tight liquidity conditions, while falling cases of new coronavirus infections also aided sentiment.

The blue-chip CSI300 index rose 1.5% to close at 5,501.09, while the Shanghai Composite Index added 0.8% to 3,533.68. Leading the gains, the CSI300 consumer discretionary index and CSI300 healthcare index added 4.3% and 2.1%, respectively.

China’s short-term money rates eased to two-week lows, as signs of liquidity tension in the interbank money markets started to fade. The People’s Bank of China (PBOC) injected a net 78 billion yuan ($12.08 billion) into money markets earlier in the day.

Bucking the broad rally, Shanghai International Airport tumbled 10% to hit its daily lower limit for a second session after the company flagged a loss for 2020.

“Market volatility could substantially increase, as valuations of the whole A-share market stand at historically high levels,” Qin Bo, an analyst with Everbright Securities, said in a note.

If the fast rise in asset prices, in particular property prices in the country’s Tier I cities, is not curbed effectively, Beijing’s marginal policy tightening could exceed market expectations, Qin said.

Persistent tight liquidity conditions recently fuelled speculation that the People’s Bank of China (PBOC) may be tightening policy and led to a sharp correction the previous week. Adding to market optimism, China reported the least number of new COVID-19 cases in a month as imported cases overtook local infections. Traders and analysts said China’s continued economic recovery helped support equities, however some have started to worry about lofty valuations and turned their eyes to Hong Kong market via the Stock Connect.