June 13, 2017 / 7:11 AM / a year ago

Small-caps lead China stocks up even ahead of expected Fed rate hike

SHANGHAI, June 13 (Reuters) - Strong gains in small-cap shares led China stocks higher on Tuesday, but trading was thin as investors remained cautious ahead of a likely U.S. interest rate hike this week.

The blue-chip CSI300 index rose 0.2 percent, to 3,582.27 points, while the Shanghai Composite Index gained 0.4 percent to 3,153.74 points.

Small-caps bounced. Shenzhen’s start-up board ChiNext advanced 1.1 percent after dropping 1.2 percent on Monday.

But investors were wary as many expect liquidity to tighten.

“There’s not much upside potential, as tighter liquidity will likely seep into the real economy, pressuring growth,” said Liu Sijia, strategist at Donghai Securities in Shanghai.

A small majority of traders in the financial markets think China’s central bank will likely raise short-term interest rates this week if the U.S. Federal Reserve raises its key policy rate, as widely expected, a Reuters poll found.

Although the size of any China rate move - likely confined to rates on open market operations - is expected to be modest, a tightening could exacerbate economic growth concerns.

Sectors performance was mixed. Gains were led by material stocks, while financial plays took a breather. (Reporting by Luoyan Liu and John Ruwitch; Editing by Jacqueline Wong)

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