China stocks ended higher on Tuesday as Beijing and Washington appeared to edge closer to a trade deal, but worries about economic headwinds at home tamed the market's rise.
At the close, the Shanghai Composite index was up 1.1 percent at 3,060.31 points, while the blue-chip CSI300 index was up 0.7 percent.
CSI300's financial sector sub-index was higher by 0.6 percent, the consumer staples sector fell 0.4 percent, healthcare shares rose 0.1 percent.
The smaller Shenzhen index ended up 1.7 percent and the start-up board ChiNext Composite index was higher by 2.6 percent. Chinese Vice Premier Liu He held a telephone call with US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer on key issues in their trade talks on Tuesday, Chinese state news agency Xinhua reported in early trade.
Aided by optimism around the trade talks, valuations of Chinese stocks have ticked up this year, though the market remains one of the cheapest in Asia, Refinitiv data showed.
"The major driver (for rally) is the recovery in valuations," analysts at Huatai Securities, who see the Shanghai Composite Index steadying between 2,800 and 3,000 points, wrote in a note on Tuesday. "But for the index to go further, (economic) fundamentals need to co-operate."
China will release a slew of economic data on Thursday, including industrial output, retail sales and fixed-asset investment for the combined period of January and February.
Data on Monday showed China's automobile sales fell 13.8 percent in February from the same month a year earlier, marking the eighth consecutive month of decline. Sources told Reuters that the People's Bank of China was studying the potential impact of interest rate overhaul to loan pricing, just as speculation grows over whether the central bank will cut interest rates soon to support the slowing economy.
China may increase its tolerance for non-performing loans at small companies in order to help spur their growth, the state-backed Securities Times newspaper quoted a senior official from the banking regulator as saying on Tuesday.
The largest percentage gainers on the main Shanghai Composite index were JiShi Media Co Ltd, Huayi Electric Co Ltd and Shenyang Jinshan Energy Co Ltd, all up by 10.1 percent. The Shanghai stock index is above its 50-day moving average and above its 200-day moving average. ** So far this year, the Shanghai stock index is up 22.7 percent and the CSI300 has risen 24.7 percent. Shanghai stocks have risen 4.1 percent this month. About 51.1 billion shares were traded on the Shanghai exchange. The volume in the previous trading session was 42.6 billion.