prewrite-China shares end up as slowing factory activity fans stimulus hopes
By Samuel Shen and Kazunori Takada
SHANGHAI May 4 (Reuters) - China stocks rose on Monday, with construction and utility stocks taking the lead, as poor Chinese factory activity reinforced expectations of fresh government stimulus.
The China HSBC PMI index dropped to 48.9 in April, showing that the country's factories suffered their fastest drop in activity for a year as new orders fell.
Further underscoring the need for more stimulus to shore up faltering growth, the State Information Centre, a top government think tank forecast that China's economy could slow further to 6.8 percent in the second quarter from a six-year low of 7 percent in the first.
"Looking ahead, risks to the outlook remain to the downside," Barclays said in a research note.
"We think monetary policy will have to stay accommodative for a sustained period to support growth and manage systemic risks in the financial market."
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.8 percent to 4,787.74 points, while the Shanghai Composite Index gained 0.9 percent to 4,480.46 points.
The CSI300 Utility Index surged 7.2 percent, with power generators including Huadian Power and GD Power all jumping by their 10 percent daily limit, after China's National Energy Administration said in an April 30 statement that one of this year's main tasks is to promote price reforms in the sector.
Infrastructure-related stocks also jumped as investors bet the government will boost construction spending.
But banking stocks underperformed the broader market after a raft of weak earnings reports highlighted slowing profit growth and rising bad loans.
The sector is "clearly exposed to a slowdown in the economy," said Gerry Alfonso, analyst at Shenwan Hongyuan Securities Co. (Editing by Kim Coghill)
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