China shares rise to two-month high on demand recovery hopes

** CATL and BYD were the day's most-traded shares through the Stock Connect's Northbound leg, Hong Kong exchange data showed. ** At 0721 GMT, the yuan was quoted at 6.6738 per U.S. dollar, 0.04% weaker than the previous close of 6.6712.

China's major share indexes finished trade at two-month closing highs on Wednesday, as consumer firms extended their rally on hopes for a demand recovery on easing COVID-19 restrictions.

** At the close, the blue-chip CSI300 index was up 0.97% at 4,219.81, its highest close since April 8. ** The Shanghai Composite index rose 0.68% to 3,263.79, its highest close since April 6.

** The CSI consumer staples sector led gains, rising 2.01%, while the financial sector sub-index added 0.62%, and the healthcare sub-index rose 1.89%. ** Foreign investors lent support, with Refinitiv data showing inflows of more than 8.7 billion yuan through the Northbound leg of the Stock Connect program.

** Analysts at BNP Paribas said equity investors were more optimistic about China's growth stabilization policies as COVID-19 lockdowns eased while sounding a note of caution. ** "Our economists expect the government to maintain the principle of dynamic zero-COVID, albeit revise the implementation to take account of the recent growth slowdown and minimize the economic impact," they said.

** "However, the highly infectious nature of the Omicron variant suggests the equity market might be more susceptible to more start-stop cycles in the near term." ** The smaller Shenzhen index ended up 0.52% and the start-up board ChiNext Composite index was higher by 0.85%.

** Shares of index heavyweight Contemporary Amperex Technology Co Ltd (CATL), a supplier to Tesla, crawled back from a drop of more than 7% to end 0.22% higher, relieving pressure on the broader index. ** The earlier drop came after a senior BYD Co Ltd executive said BYD was preparing to supply Tesla with batteries "very soon".

** BYD's shares ended 3.98% higher in Shenzhen and were up more than 3% in late trade in Hong Kong. ** CATL and BYD were the day's most-traded shares through the Stock Connect's Northbound leg, Hong Kong exchange data showed.

** At 0721 GMT, the yuan was quoted at 6.6738 per U.S. dollar, 0.04% weaker than the previous close of 6.6712.