Chinese stocks rally year high on signs of economic recovery

Chinese stocks jumped on Monday to their highest level in about a year on signs of recovery in the Chinese economy, raising hopes that Beijing's growth support policies are staring to make an impact. At midday, the Shanghai Composite index was up 2.3 per cent at 3,161.49 points, a level not seen since May 2018. The blue-chip CSI300 index rose 2.3 per cent to 3961.80 points, its highest point since March 2018.

CSI300's financial sector sub-index was higher by almost 2 per cent, consumer staples stocks rose 0.9 per cent, and healthcare shares were up 2 per cent. Factory activity in China unexpectedly grew for the first time in four months in March, both official and private surveys showed, suggesting government stimulus measures may be starting to take hold. The private survey's findings showed factories hired workers in March for the first time in over four years, arresting a relentless spell of job shedding since October 2013.

U.S. President Donald Trump said on Friday that trade talks with China were going very well, shortly before Chinese Vice Premier Liu He's scheduled visit to Washington to resume the negotiations this week. China's State Council said on Sunday that the country would continue to suspend additional tariffs on U.S. vehicles and auto parts after April 1, in a goodwill gesture following a U.S. decision to delay tariff hikes on Chinese imports.

Real estate shares rallied 3.7 per cent after a Reuters poll showed home prices in China are expected to rise more this year than predicted just a few months ago, as Beijing urges banks to ramp up lending and lower interest rates to boost growth. China's "measures to lower taxes and fees, the further opening up of the financial sector, smooth progress in Sino-U.S. negotiations and acceleration in commercial use of 5G (technology) all continued to add to the risk appetite in the A-share market," Yang Ouwen, an analyst at Chuancai Securities, wrote in a note on Monday.

Telecom stocks in the CSI rallied 3.2 per cent after a government official said last week that China could start issuing 5G licences this year. "Chinese equities are leading global peers and showing a significant slowdown in downward revision," analysts at Morgan Stanley, who expect the CSI300 to trade close to 4,300 points by December, wrote in a memo on Monday. "They are on track to become the first batch to go back into positive revisions." Chinese H-shares listed in Hong Kong rose 1.7 per cent, while the Hang Seng Index was up 1.7 per cent at 29,530.19 points.

The smaller Shenzhen index was up 3 per cent and the start-up board ChiNext Composite index was higher by 3.4 per cent. Around the region, MSCI's Asia ex-Japan stock index was firmer by 1 per cent while Japan's Nikkei index was up 1.9 per cent. As of midday, China's A-shares were trading at a premium of 24.70 per cent over the Hong Kong-listed H-shares. The Shanghai stock index is above its 50-day moving average and above its 200-day moving average.