China stocks hit 7-yr high, weak factory activity fans stimulus optimism
By Samuel Shen and Pete Sweeney
SHANGHAI, April 23 (Reuters) - China stocks rose to fresh seven-year highs on Thursday, with weaker-than-expected factory activity data reinforcing expectations of fresh government stimulus.
The flash HSBC/Markit Purchasing Managers' Index (PMI) showed that China's factory activity in April contracted at its fastest pace in a year, suggesting that economic conditions are still deteriorating.
Barclays said in a research note that it expects "stepped-up policy easing measures to stabilise the property market, boost infrastructure investment, and lower the cost of financing in the economy."
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose slightly and ended at 4,740.89, while the Shanghai Composite Index gained 0.4 percent, to 4,414.51 points.
Shenzhen's start-up board ChiNext jumped nearly 2 percent to a fresh record high.
Analysts said that with the stock market having gained nearly 80 percent since November, more volatility is expected, but any correction could be shallow, given signs that fresh money keeps flooding into the market.
There was a net flow of 781.4 billion yuan ($126.1 billion) into the stock market, marking the fourth consecutive week of net inflows.
And new stock trading accounts hit a record 3.3 million last week, almost doubling from the previous week, although that also reflected a rule change that let investors open multiple share accounts.
Chinese steelmakers rose sharply as investors' interest shifts to some relatively cheaper cyclical stocks. Internet-related stocks were also up.
Great Wall Motor jumped nearly 7 percent in Hong Kong and 4.4 percent in Shanghai after German publication Manager Magazin reported that German auto giant Volkswagen AG is in talks with the Chinese automaker about co-operation or even an equity stake. (Reporting by Samuel Shen and Pete Sweeney; Editing by Jacqueline Wong)
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