September 21, 2018 / 7:34 AM / 3 months ago

China stocks soar on policy support hopes

SHANGHAI, Sept 21 (Reuters) - China’s stock markets surged on Friday before a long holiday weekend, with investor sentiment boosted by hopes that a government effort to boost domestic demand could help offset effects of an escalating trade war.

At the close, the blue-chip CSI300 index rose 3.0 percent, its biggest one-day gain since May 2016, to end at 3,410.49 points.

The Shanghai Composite Index gained 2.5 percent to 2,797.48 points. It was the Shanghai index’s best week since March 2016.

“Investors are hunting bargains in banking and real estate stocks which are trading at low valuations,” said Chen Xiaopeng, an analyst with Sealand Securities, adding that any impact from Sino-U.S. trade frictions were already priced into the market.

Chen said that market participants also cheered news of new State Council guidelines on improving domestic consumption, which helped lift consumer firms.

A detailed document issued late Thursday by the State Council, China’s cabinet, ordered policies and resources to be geared towards sectors including tourism and sports to help give a broad-based boost to domestic consumption.

A sub-index of the CSI300 tracking consumer staples ended 3.6 percent higher on Friday, while the financial sector sub-index soared 3.78 percent, the real estate index jumped 4.45 percent and the healthcare sub-index ended 2.31 percent higher.

The smaller Shenzhen index ended up 1.77 percent up and the start-up board ChiNext Composite index was higher by 1.69 percent.

Strength in China’s stock markets was matched by strength in the yuan, which was on course for a rare weekly gain, buoyed by an easing dollar.

At 0720 GMT, the yuan was changing hands at 6.8353 per dollar, 107 pips stronger than the previous day’s onshore close of 6.8460 per dollar.

The largest percentage gainers in the main Shanghai Composite index on Friday were Shenzhen Geoway Co Ltd , Air China Ltd and China Sports Industry Group Co Ltd, all of which rose by the 10 percent daily limit.

Despite the rally, both the Shanghai stock index and the CSI300 are down 15.4 percent for the year, while China’s H-share index listed in Hong Kong has fallen 5.5 percent. Shanghai stocks have risen 2.65 percent this month. (Reporting by Andrew Galbraith and Luoyan Liu; Editing by Simon Cameron-Moore)

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