Chinese service sector post 14-month high growth amid US-China trade optimism

China and Hong Kong stocks rose on Wednesday, encouraged by further signs of recovery in the world's second largest economy, and on signs of progress in U.S.-China trade talks.

** The CSI300 index rose 0.2 per cent to 3,980.32 points at the end of the morning session, while the Shanghai Composite Index gained 0.2 per cent to 3,184.18 points. ** The Hang Seng index added 0.9 per cent to 29,879.21 points, while the Hong Kong China Enterprises Index gained 0.7 per cent, to 11,627.86 points.

** Activity in China's services sector picked up to a 14-month high in March as demand improved at home and abroad, a private business survey showed on Wednesday, adding to signs that government stimulus policies are gradually kicking in. ** The findings were largely in line with those of an official gauge on the non-manufacturing sector released on Sunday, which showed services activity picked up in March as new orders rose more quickly. Construction, in particular, showed strength, likely reflecting government efforts to fast-track more infrastructure projects to kindle domestic demand.

** China's central bank is expected to cut banks' cash reserve requirements again soon to bolster financial system liquidity as it looks to support the slowing economy, analysts said, as market speculation over another policy move grows. ** Investors also cheered the progress in Sino-U.S. trade talks.

** The United States and China "expect to make more headway" in trade talks this week, White House economic adviser Larry Kudlow said on Tuesday as the top U.S. business lobbying group said differences over an enforcement mechanism and the removal of U.S. tariffs were still obstacles to a deal. ** Chinese investors are near-term optimistic about equities, even as they prepare for a global economic slowdown in the next few years, according to a J.P. Morgan Asset Management survey of nearly 200 investors in Mainland China on their current sentiment and asset allocation strategy.

** "Recent positives such as the U.S. Federal Reserve pausing their interest rate increases, incremental signs of progress on China-U.S. trade negotiations and a dovish bias from China's PBoC to support growth have given investors a sunnier attitude about risk assets," said Tai Hui, chief market strategist, Asia Pacific, J.P. Morgan Asset Management. ** Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.68 per cent while Japan's Nikkei index was up 0.85 per cent.

** The yuan was quoted at 6.7119 per U.S. dollar, 0.16 per cent firmer than the previous close of 6.7225. ** The largest percentage gainers on the main Shanghai Composite index were Nanjing Tanker Corp, up 10.13 per cent, followed by Shanghai U9 Game Co Ltd, gaining 10.07 per cent and Shanghai Material Trading Co Ltd, up by 10.04 per cent.

** The largest percentage losers on the Shanghai index were Hangzhou TianMuShan Pharmaceutical Enterprise Co Ltd, down 9.27 per cent, followed by Wuhan Yangtze Communication Industry Group Co Ltd, losing 7.96 per cent and ZheJiang JiHua Group Co Ltd, down by 6.82 per cent. ** So far this year, the Shanghai stock index is up 27.38 per cent, while China's H-share index is up 14.0 per cent. Shanghai stocks have risen 2.78 per cent this month.

** The top gainers among H-shares were Great Wall Motor Co Ltd, up 3.96 per cent, followed by China Communications Construction Co Ltd, gaining 2.64 per cent and Tencent Holdings Ltd, up by 2.4 per cent. ** The three biggest H-shares percentage decliners were China Telecom Corp Ltd, which has fallen 2.47 per cent, Bank of Communications Co Ltd, which has lost 1.7 per cent and China Gas Holdings Ltd, down by 1.1 per cent.

** About 22.56 billion shares have traded so far on the Shanghai exchange, roughly 54.7 per cent of the market's 30-day moving average of 41.24 billion shares a day. The volume traded was 44.71 billion as of the last full trading day. ** As of 0417 GMT, China's A-shares were trading at a premium of 24.69 per cent over the Hong Kong-listed H-shares.

(With inputs from agencies.)