China stocks rose again on Wednesday to a fresh three-week high, as demand for infrastructure shares helped the market maintain a rebound fuelled by economic stimulus hopes, although some analysts warned the relief rally could soon peter out. The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.9 percent, to 3,063.32, while the Shanghai Composite Index gained 1.1 percent, to 2,867.34 points.
After a sluggish performance in the morning, the indexes were lifted in afternoon trading by the infrastructure sector, which jumped over 2 percent as the government unveiled plans to invest 400 billion yuan ($61.42 billion) in infrastructure. Investors, which had bet on a cut in global oil production, gave a lukewarm response to a potential deal between Saudi Arabia and Russia to freeze oil output at January levels.
This week's market rally on the mainland had been partly triggered by expectations that Beijing would launch fresh economic stimulus and prop up the yuan currency, and also by a surge in Chinese lending in January. However, Hong Hao, managing director of research at BOCOM International, said that Beijing's policy mix can only temporarily stabilise growth expectations, as there are growth limits on China's money supply, debt and investment.
"For market participants, the question is whether the technical reprieve is sustainable," Hong wrote on Wednesday. Rate-sensitive sectors such as banks and property are already pricing in credit expansion, so "we should trade but not own this relief rally." Most sectors, including banks and real estate fell in early trade, but infrastructure stocks gained nearly 1 percent on news that the government planned to allocate 400 billion yuan ($61.42 billion) to fund infrastructure projects.