March 1, 2019 / 7:45 AM / 6 months ago

Shanghai stocks post best week in nearly 4 years after MSCI move

* Shanghai stocks up 1.8 pct, blue-chip CSI300 index up 2.2 pct

* MSCI to quadruple weighting of A-shares in global benchmarks

* China manufacturing activity shrinks again in Feb but at slower pace

SHANGHAI, March 1 (Reuters) - China stocks climbed on Friday to kick off a new month on a bullish note, with the benchmark Shanghai index posting its biggest weekly gain in nearly four years, as investors cheered the progress in A-share market’s internationalisation process, shrugging off soft factory activity data.

** The blue-chip CSI300 index rose 2.2 percent to 3,749.71, while the Shanghai Composite Index closed up 1.8 percent at 2,994.01.

** For the week, SSEC gained 6.8 percent, its best week since June 2015, while the CSI300 was up 6.5 percent, its best week since November 2015.

** Global index provider MSCI is quadrupling the weighting of Chinese mainland shares in its global benchmarks later this year, a move it said might draw more than $80 billion of fresh foreign inflows to the world’s second-biggest economy.

** “We estimate these changes would lead to a $67 billion fund inflow to the A-share market this year,” Gao Ting, Head of China Strategy at UBS Securities, noted in report.

** Foreign investors as a group have surpassed insurers as the largest A-share holder, and with the help of the MSCI weight increase, are likely to rival domestic mutual funds soon, Gao added.

** “Inclusion should boost investor sentiment and, over the long term, flows into China,” Caroline Yu Maurer, head of Greater China equities at BNP Paribas Asset Management, said in a note.

** “It also helps advance President Xi Jinping’s ambitions to make the renminbi a global currency,” she said.

** Consumer stocks led the charge on Friday, with the CSI consumer staples index closing up 3.2 percent, having gained 27.6 percent so far this year.

** At the sector level, foreign investors have shown a consistent preference for food & beverage (F&B) and consumer durables, Gao noted.

** Financial firms also shined with a 3.1 percent rise on Friday, extending a strong run-up after Beijing vowed deepening supply-side reforms

** China’s efforts to deepen supply-side reforms, which could not simply be compared to its previous reforms in the steel and coal sectors for capacity cuts, would help bolster market confidence, Citic Securities wrote in report.

** Amid the upbeat mood, the weak data seemed to reinforce hopes that Beijing will step up efforts to bolster the growth.

** China’s factory activity contracted for a third straight month in February but at a slower pace, helped by improvements in domestic manufacturing, a private survey showed on Friday.

** China’s leaders will pledge in parliament next week to keep the country on safe footing as the economy faces its biggest test in years, amid pressure to roll out more measures to bolster growth and revive weak business and consumer confidence.

** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.31 percent, while Japan’s Nikkei index closed up 1.02 percent.

** At 07:16 GMT, the yuan was quoted at 6.703 per U.S. dollar, 0.14 percent weaker than the previous close of 6.6935.

** So far this year, the Shanghai stock index is up 20.1 percent and the CSI300 has risen 24.5 percent, while China’s H-share index listed in Hong Kong is up 13.6 percent. Shanghai stocks have risen 1.8 percent this month.

** About 34.58 billion shares were traded on the Shanghai exchange, roughly 154.4 percent of the market’s 30-day moving average of 22.39 billion shares. The volume in the previous trading session was 35.02 billion.

** As of 07:17 GMT, China’s A-shares were trading at a premium of 24.31 percent over the Hong Kong-listed H-shares. (Reporting by Shanghai Newsroom; Editing by Gopakumar Warrier)

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