China’s blue-chip stock index hit six-month highs on Thursday morning, with investor sentiment boosted by the yuan’s recent strength, signs of improved liquidity in the financial system and bullish May trade data. The market was also bolstered by Beijing’s commitment to further reduce cost burdens on companies, and growing expectations that index publisher MSCI will decide to include Chinese A shares into its benchmark on June 20.
The blue-chip CSI300 index rose 0.5 percent, to 3,549.65 points by the lunch break, its best level since early December, while the Shanghai Composite Index gained 0.1 percent, to 3,144.81 points. The market responded positively to China’s foreign exchange reserves data published on Wednesday showing reserves rose in May for a fourth consecutive month and by more than markets had expected.
Analysts expect foreign reserves to increase further as cross-border capital flows stabilise and as the yuan has sharply rebounded against the U.S. dollar. During China’s midday break, trade data showed stronger-than-anticipated exports and imports for May despite falling commodity prices, suggesting the economy is holding up better than expected.
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. Most sectors rose on Thursday, with transport and health care stocks among the biggest gainers. Chinese garment maker Youngor Group jumped more than 5 percent, after the company said China’s state-owned margin lender had increased holdings in the company.
CAUTION IN HONG KONG
Hong Kong stocks hovered near 23-month highs, as investors became increasingly cautious ahead of a slew of key global events in the coming week. Both the Hang Seng index and the Hong Kong China Enterprises Index added 0.2 percent, to 26,027.44 points, and 10,636.90, respectively.
Investors are bracing for any surprises from the UK general elections, the European Central Bank’s policy meeting and congressional testimony from ex-FBI director James Comey who was fired by President Donald Trump last month.