SHANGHAI: China stocks erased early losses and edged higher on Wednesday morning, but gains were limited after the central bank raised interest rates on a key funding tool to curb borrowing. Hong Kong’s benchmark stock index also rose, taking its cue from a firmer Wall Street, with tech stocks leading gains. The blue-chip CSI300 index, poised for a fourth day of gains, and rose 0.3 percent, to 3,373.42 points at the end of the morning session, while the Shanghai Composite Index gained 0.2 percent, to 3,149.92 points.
China’s insurance regulator, in the latest move to control risk, said on Tuesday that it was reimposing ceilings on funds insurers can put into the stock market. The ruling follows a slew of regulatory measures since late last year that has rattled markets. But Xiao Shijun, analyst at Guodu Securities in Beijing, said market reaction was muted as investors had priced in the regulator’s tightening control on insurers’ leverage buyout. The market was closely monitoring U.S. President Donald Trump’s policies, that could set the tone on trade ties between the world’s two largest economies and consequently affect the stock market, Xiao said. “I don’t think he will back off. He makes pretty clear that American interest is the top priority and he wants to restore the glory of the United States,” Xiao said. The market’s bullish sentiment was partly countered by China’s central bank raising interest rates on its medium-term lending facility (MLF) on Tuesday, a move seen to be in line with its broader objective of reining in speculative investment in the economy. Most sectors gained ground by the lunch break. An index tracking infrastructure stocks advanced around 0.5 percent, as shares of heavyweight China State Construction Engineering Corp Ltd rose 2.5 percent.
Shares of Aluminum Corp of China Ltd, the nation’s top aluminium producer, jumped 3.9 percent by midday, after reports of possible capacity cuts. In Hong Kong, the Hang Seng index added 0.2 percent, to 22,989.62 points, while the Hong Kong China Enterprises Index lost 0.2 percent, to 9,742.21 points. Sentiment was partly lifted by cross-border stock buying. China investors used 31.1 percent of the Shanghai-Hong Kong Stock Connect’s daily quota on Tuesday to buy Hong Kong stocks, the biggest in more than three weeks. But investors had not used the quota at all by midday on Wednesday, the Hong Kong Stock Exchange website showed.
