BEIJING: China stocks extended gains on Thursday, with the blue-chip CSI300 index settling at a fresh six-month high, buoyed by stronger-than-expected foreign exchange and trade data. Chinese markets were also supported by signs of improved liquidity in the financial system and growing expectations that index publisher MSCI will decide to include Chinese A shares in its benchmark on June 20. The blue-chip CSI300 index rose 0.8 percent to 3,560.98 points, while the Shanghai Composite Index added 0.3 percent to 3,150.33. Data on Wednesday showed China’s foreign exchange reserves rose more than expected in May to a seven-month high as tougher capital restrictions and a weak dollar reduced pressure from capital outflows.
Analysts expect forex reserves to increase further as the yuan has sharply rebounded against the U.S. dollar in recent weeks after the central bank declared war on speculators. Further boosting sentiment, China reported stronger-than-anticipated exports and imports for May despite falling commodity prices, suggesting the economy is holding up better than expected despite rising lending rates and a cooling property market. Most economists, however, still share the view that the economy will gradually lose momentum in coming months as property cooling measures and higher financing costs drag on investment and business activity.
Brokerage Lianchu Securities also attributed the market rebound to signs that “the central bank has intentionally moved to stabilise market expectations,” by injecting more liquidity into the banking system. Gains were led by the defensive healthcare and consumer stocks, whose index closed at a record high since its launch in 2005, as investors favoured blue-chips with lower valuations and good fundamentals.
