China stocks bounce back from over four-year low on trade optimism

China stocks bounced back from a more than four-year low on Friday, as optimism about trade talks with the United States helped sooth investor nerves and after a private survey showed solid growth in the service sector. The CSI300 index rose 2.3 percent, to 3,031.82 points, by the end of the morning session, while the Shanghai Composite Index gained 1.8 percent, to 2,509.02 points.

The benchmark Shanghai index briefly touched a more than four-year low just as the market opened. China and the United States will hold vice ministerial level trade talks in Beijing on Jan. 7-8, as the two sides look to end a dispute that is inflicting increasing pain on both economies and roiling global financial markets. China's services sector extended its solid expansion in December, offering some cushion for the slowing economy, a private survey showed on Friday.

"We are strategically optimistic, as the A-shares market is in the midst of the final stage of the fifth round of bullish-bearish cycle, with the valuation(s) already touching bottom," Haitong Securities wrote in note. In comparison with other global stock markets, the A-shares market has greater appeal, and as China has been developing equity financing to support industrial upgrading, residential asset allocation will be more focused on the stock market, the brokerage added. On the mainland, sectors rallied strongly across the board, led by financial firms, in particular brokerage firms which are expected to benefit from a market rebound.

In Hong Kong, the Hang Seng index added 1.3 percent, to 25,390.46 points, while the Hong Kong China Enterprises Index gained 1.3 percent, to 9,967.20 points. Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.43 percent, while Japan's Nikkei index was down 2.70 percent. The yuan was quoted at 6.8618 per U.S. dollar, 0.16 percent firmer than the previous close of 6.873. The largest percentage gainers on the main Shanghai Composite index were Pengqi Technology Development Co Ltd , up 10.11 percent, followed by Pengqi Technology Development Co Ltd, gaining 10.11 percent, and Southwest Securities Co Ltd, up by 10.11 percent.

The largest percentage losers on the Shanghai index were Nanjing Panda Electronics Co Ltd, down 7.42 percent, followed by Ningbo Joyson Electronic Corp, losing 7.02 percent, and GuangDong Super Telecom Co Ltd, down by 5.03 percent. So far this year, the Shanghai stock index is down 1.18 percent, while China's H-share index is down 2.9 percent. The top gainers among H-shares were CSPC Pharmaceutical Group Ltd, up 7.55 percent, followed by GF Securities Co Ltd, gaining 5.42 percent, and Haitong Securities Co Ltd, up by 5.42 percent.

The three biggest H-shares percentage decliners were Air China Ltd, which has fallen 2.83 percent, Anhui Conch Cement Co Ltd, which has lost 0.8 percent, and Dongfeng Motor Group Co Ltd, down by 0.6 percent. About 9.65 billion shares have traded so far on the Shanghai exchange, roughly 71.8 percent of the market's 30-day moving average of 13.44 billion shares a day. The volume traded was 12.44 billion as of the last full trading day. As of 04:02 GMT, China's A-shares were trading at a premium of 20.23 percent over the Hong Kong-listed H-shares.

(With inputs from agencies.)