Shanghai Composite Index surge 2.6 pct on progress in US-China trade talks

China stocks jumped on Monday with the Shanghai Composite Index hitting its highest in 10 months, while blue-chips touched a one-year peak, on long-awaited signals of an economic recovery and the progress in Sino-U.S. trade talks. The Shanghai Composite Index closed up 2.6 per cent at 3,170.36, its highest point since May 2018.

The blue-chip CSI300 index rose 2.6 per cent to 3,973.92, a level not seen since March 2018. Trading volume in Shanghai was the highest in almost three weeks. About 46.61 billion shares were traded on the Shanghai exchange. The volume in the previous session was 37.51 billion. Factory activity in China unexpectedly grew for the first time in four months in March, 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. Although recent data shows recovering demand, it will take time to establish whether support from government stimulus is sustainable, analysts at Huatai Securities wrote in a note. "We believe the second quarter will be an observation period for the impact of counter-cyclical policies," they said.

China's State Council said on Sunday 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. The news came shortly before Chinese Vice Premier Liu He's scheduled visit to Washington to resume trade talks this week. Real estate shares rallied 3.4 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.

"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 by December, wrote in a memo on Monday. "They are on track to become the first batch to go back into positive revisions."

CSI300's financial sub-index climbed 2 per cent, the consumer staples sector was up 1.7 per cent, and healthcare shares rose 2.2 per cent. The smaller Shenzhen index ended up 3.6 per cent and the start-up board ChiNext Composite index was higher by almost 4 per cent. Around the region, MSCI's Asia ex-Japan stock index was firmer by close to 1 per cent, while Japan's Nikkei index closed up 1.4 per cent.

So far this year, the Shanghai stock index has gained 27.1 per cent and the CSI300 has risen almost 32 per cent. As of 07:03 GMT, China's A-shares were trading at a premium of 24.73 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.