June 11, 2019 / 9:00 AM / 2 months ago

China stocks jump as Beijing signals fresh support for growth

* Shanghai shares add 2.6%, blue-chips jump 3%

* China vows infrastructure funding with special bonds

* Sentiment improves as global cenbanks turn accommodative

* Trump keeps tariffs on the table ahead of G20 meeting

By Noah Sin

HONG KONG, June 11 (Reuters) - Chinese stocks jumped on Tuesday after Beijing eased financing rules to boost local government spending on public works while expectations of lower central bank rates globally and some signs of easing trade tensions also supported sentiment.

The Shanghai Composite climbed 2.6% to 2,925.72 points, a level not seen since May 29, while the blue-chip rallied 3%.

Giving a boost to domestic shares was news that China would allow local governments to use proceeds from special bonds for major investment projects, including highways, gas and power supply and railways, which would help prop up a slowing economy.

Additionally, expectations for interest rate cuts globally have given investors a catalyst to re-enter China’s market following disappointing performance in May, said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong.

“Policy has been supportive and that helps with domestic demand, with things like utilities,” said Yip.

Gains were seen across the board, with CSI300’s financial sub-index up 2.4%, technology index up 4.3%, and consumer staples stocks higher by a whopping 5.3%.

In Hong Kong, the Hang Seng Index rose 0.8% to 27,789.34 points, while H-shares climbed 0.9%.

The smaller Shenzhen index gained 3.7% and the start-up board ChiNext Composite index climbed 3.9%.

In global markets, sentiment has improved as investors moved to price in more than two 25 basis point of cuts by the Federal Reserve in 2019, with one almost fully priced in by July .

This encouraged foreign investors to advance in Chinese equities, according to Cao Xuefeng, head of research at Huaxi Securities.

“This has changed the risk appetite for financial markets,” he said. “If the U.S. lowers rates, capital may go to higher yielding markets. They could flow into A-shares.”

Foreign investors bought a net 7.37 billion yuan of Chinese shares on Tuesday. They were net sellers in May.

Zhang Qi, an analyst at Haitong Securities in Shanghai, said many investors are buying the recent dip, pointing to high trading volumes. About 26.05 billion shares have been traded on the Shanghai exchange, the most since May 17. The volume traded was 16.66 billion on Monday.

But continued concerns about the U.S.-China trade war, which has showed no material signs of ending, remain a cloud on the outlook.

U.S. President Donald Trump said on Monday he was ready to impose another round of punitive tariffs on Chinese imports if he cannot make progress in trade talks with China’s President at a Group of 20 summit later this month.

China’s Foreign Ministry said on Monday it has nothing to announce about a possible meeting between the Chinese and U.S. leaders at this month’s G20 summit, though the country is open for more trade talks with Washington. (Additional Reporting by Luoyan Liu in Shanghai; Editing by Sam Holmes)

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