April 20, 2017 / 7:18 AM / a year ago

China stocks snap 4-day losing streak but Xiongan plays drag

SHANGHAI, April 20 (Reuters) - China stocks snapped a four-day losing streak on Thursday, with investors continuing to seek cover in defensives such as the consumer and healthcare sectors, while fleeing small caps and stocks related to the new Xiongan economic zone.

The blue-chip CSI300 index rose 0.5 percent to 3,461.55 points, while the Shanghai Composite Index edged up 0.1 percent to 3,172.10.

Zhangtai Securities warned in its latest strategy report that stocks will remain volatile amid an increasingly tighter regulatory and monetary policy environment.

Chinese shares have also been pressured by worries that economic and corporate profit growth will soon start to fade after a strong start to the year. But investors drew some solace from Beijing’s pledge late on Wednesday to step up policy support if there is a jump in the jobless rate.

Underscoring reduced risk appetite, investors rushed into sectors that promise stable returns and generous dividend payouts, pushing both consumer and healthcare indexes up over 2 percent, while an index tracking liquor makers jumped 3.3 percent.

However, stocks expected to benefit from the newly-launched Xiongan zone near Beijing lost steam, with building materials maker BBMG and Baoding Tianwei Baobian Electric tumbling by their 10 percent daily limit.

Xiongan has been widely seen as a high-profile property and infrastructure investment theme, but rocketing share price rises for firms which could benefit from the plan have prompted warnings from regulators about excessive speculation.

Small caps in general were weak for similar reasons, with some tumbling more than 30 percent in the past four sessions.

Elsewhere, an index tracking the country’s major lenders slid to a seven-month low amid worries over increasing regulation, and after Moody’s said results of Chinese banks for 2016 showed continued pressure on profitability. (Reporting by Luoyan Liu and John Ruwitch; Editing by Kim Coghill)

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