SHANGHAI: China’s blue-chip share index jumped on Monday as risk appetite improved after the central bank said it would cut reserve requirements to prop up the economy, outweighing any investor concerns about Washington’s new sanctions.

The blue-chip CSI300 index closed up 1.25% at 5,132.71 points. Despite its strong performance on Monday, the index was, however, down 1.5% for the year and more than 13% below peaks hit in February.

At the close, the benchmark Shanghai Composite index was up 0.67% at 3,547.84 points, while the smaller Shenzhen index ended up 1.93% and the start-up board ChiNext Composite index closed higher by 3.68%.

Analysts and economists attributed the gains to China’s efforts to sustain the economic recovery momentum as the People’s Bank of China (PBOC) said it would cut the amount of cash that banks must hold as reserves, releasing around 1 trillion yuan in long-term liquidity to underpin the economy.

“We think this broad-based RRR cut could boost market sentiment in the short term and improve stock market liquidity,” said Meng Lei, A-share strategist at UBS Securities.

Meng expects liquidity-sensitive sectors and those with strong earnings growth expectations, including EV, batteries, new energy, to outperform in the short term.

Meanwhile, markets showed little reaction to the Biden administration’s decision on Friday to add 14 Chinese companies and other entities to its economic blacklist over alleged human rights abuses and high-tech surveillance in Xinjiang.