China stocks rose on Wednesday, continuing their recovery from recent declines, as renewed optimism about the U.S. economy and easing concerns about regulatory tightening on the mainland lifted sentiment in global equity markets.
Both China’s blue-chip CSI300 index and the Shanghai Composite Index gained 0.4 percent by the lunch break, to 3,453.69 points and 3,145.71 points, respectively, their second straight day of gains.
Hong Kong benchmark Hang Seng index rose 0.6 percent to 24,598.85 points, while the Hong Kong China Enterprises Index gained 0.7 percent to 10,340.43. A break of the March 21 peak of 24,656.65 would set it at a 20 month high.
Risk appetite improved as Asian stocks extended gains for a fifth consecutive day following a strong finish to the U.S. markets.
The Nasdaq Composite hit a record high on Tuesday, while the Dow and S&P 500 brushed against recent peaks as strong earnings underscored the health of corporate America.
A rebound in China stocks has also been aided by the perception by some that fears of Beijing’s deleveraging campaign, which had knocked down share prices to three-month lows, were overdone.
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“China’s deleveraging can only go gradually,” Chi Lo, an economist at BNP Paribas Investment Partners wrote in a report on Wednesday.
“Barring any renewed growth weakness, selective small monetary tightening, amid a broad neutral monetary stance, will remain as a tool to slow the pace of leveraging and set the stage of eventual deleveraging.”
Confirming such a monetary stance, China’s politburo, a top decision-making body of the ruling Communist Party, said late on Tuesday that China will maintain proactive fiscal policy and prudent monetary policy, according to the official Xinhua news agency.
Chinese investors continue to pile into defensive sectors while reducing holdings in growth stocks.
Utilities and consumer-staple stocks rose, while the start-up board ChiNext ended morning trading in negative territory.
In Hong Kong, financials led the market higher as fund managers bet on expectations the quality of banks’ balance sheets will likely get better on an improving economic cycle and cheaper valuations.
“We are carrying on the momentum from the overnight rally in the U.S. markets and financials are in the spotlight on expectations of good earnings,” said Alex Wong, a fund manager at Ample Capital Ltd in Hong Kong.
(Samuel Shen and John Ruwitch; Addition reporting by Saikat Chatterjee; Editing by Sam Holmes)