China, Hong Kong market rose amid optimism over Fed meet

China and Hong Kong stocks climbed on Monday, amid mounting speculation that the U.S. Federal Reserve will sound decidedly dovish at its policy meeting this week, and thanks to hopes Beijing will use more policy tools to underpin growth.

The CSI300 index rose 1.6 per cent to 3,804.50 points at the end of the morning session, while the Shanghai Composite Index gained 1.3 per cent to 3,059.95 points. There are much talk Fed policymakers will lower their interest rate forecasts, or "dot plots", to show little or no further tightening this year.

The Chinese government has additional monetary policy measures that it can take to support economic growth this year, and will even cut "its own flesh" to help finance large-scale tax cuts, Premier Li Keqiang said on Friday. Li's comments suggest Beijing is ready to roll out more stimulus measures to ensure the economy grows within a targeted range of 6.0 to 6.5 per cent.

"Overall we are very optimistic about China's stock market and continue to be bullish after the recent recovery," Laura Wang, China equity strategist at Morgan Stanley, said at a media briefing, citing improvement in corporate earnings, Beijing's policies to bolster growth and progress in Sino-U.S. trade talks. There is a 10-15 per cent potential upside for the A-share market, she said, recommending that global investors further hike their exposure to Chinese stocks.

Consumer firms led the advance on the mainland, with the CSI consumer staples index up 4.7 per cent by the lunch break, as those companies are widely seen as a beneficiary of Beijing's measures to boost domestic consumption. In Hong Kong, the Hang Seng index added 0.7 per cent, to 29,224.25 points, while the Hong Kong China Enterprises Index gained 0.7 per cent, to 11,590.11 points.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.65 per cent while Japan's Nikkei index was up 0.68 per cent. The yuan was quoted at 6.7126 per U.S. dollar, 0.02 per cent firmer than the previous close of 6.714.

The largest percentage gainers on the main Shanghai Composite index were Taiyuan Chemical Industry Co Ltd, up 10.07 per cent, followed by Hunan Chen Dian International Development Co Ltd, gaining 10.04 per cent and Shanghai Phoenix Enterprise Group Co Ltd, up by 10.04 per cent.

The largest percentage losers on the Shanghai index were Zhonglu Co Ltd, down 9.97 per cent, followed by Shanghai Shibei Hi-Tech Co Ltd, losing 9.95 per cent and Ningbo Tuopu Group Co Ltd, down by 8.92 per cent.

So far this year, the Shanghai stock index is up 21.17 per cent, while China's H-share index is up 13.7 per cent. Shanghai stocks have risen 2.75 per cent this month. The top gainers among H-shares were China Resources Land Ltd, up 6.57 per cent, followed by China Vanke Co Ltd, gaining 4.64 per cent and Shenzhou International Group Holdings Ltd, up by 2.29 per cent.

The three biggest H-shares percentage decliners were Anhui Conch Cement Co Ltd, which has fallen 5.20 per cent, China National Building Material Co Ltd, which has lost 4.6 per cent and CNOOC Ltd, down by 1.5 per cent.

About 22.26 billion shares have traded so far on the Shanghai exchange, roughly 66.0 per cent of the market's 30-day moving average of 33.72 billion shares a day. The volume traded was 34.12 billion as of the last full trading day. As of 0417 GMT, China's A-shares were trading at a premium of 23.06 per cent over the Hong Kong-listed H-shares.