China blue-chips boosted by govt push for urbanization but Shanghai index struggles

China's blue chip CSI300 index rose on Tuesday as Beijing took steps to encourage urbanisation to support economic growth, but the broader Shanghai index ended lower on uncertainty over trade talks with the United States and upcoming data releases.

At the close, the blue-chip CSI300 index gained 0.5 per cent, while the Shanghai Composite index was down 0.2 per cent at 3,239.66 points. CSI 300's financial sector sub-index rose 0.1 per cent, the consumer staples sector gained 2.8 per cent, and healthcare shares rose 1.9 per cent. The smaller Shenzhen index ended up 0.7 per cent and the start-up board ChiNext Composite index was higher by 0.1 per cent.

China will relax residency curbs in many of its smaller cities this year and increase infrastructure spending, the state planner said on Monday, in a fresh push to boost the urban population and revive slowing economic growth. The government aims to increase China's urbanisation rate by at least 1 percentage point by the end of this year. In 2018, 59.6 per cent of China's population lived in urban areas. The move sent shares of property developers higher, with the CSI 300 real estate index hitting its 14-month high.

However, the three conditions historically needed for a Chinese equity bull market - a rebound in economic fundamentals, high and steady earnings growth, and sustained credit expansion - are all absent, Chuancai Securities analyst Yang Ouwen wrote in a note on Tuesday. "A-shares still face the risk of adjustment in the second quarter," said Yang.

On Friday, China is expected to report import and export data. Consumer price index (CPI) and producer price index (PPI), data are due on Thursday. Trading activity on the Shanghai exchange fell to about 36.4 billion shares, the lowest since March 26. The volume in the previous trading session was 50.5 billion shares.

U.S. officials are "not satisfied yet" about all the issues standing in the way of a deal to end the U.S.-China trade war but made progress in talks with China last week, a top White House official said on Monday. The two sides wrapped up the latest round of talks in Washington late last week and will be resuming discussions this week remotely.

Around the region, MSCI's Asia ex-Japan stock index firmed 0.3 per cent, while Japan's Nikkei index closed up 0.2 per cent. The largest percentage gainers in the main Shanghai Composite index were HNA Innovation Co Ltd, Nanjing Tanker Corp and Jiangsu Hongdou Industrial Co Ltd, all up by 10.1 per cent. So far this year, the Shanghai stock index is up 29.9 per cent and the CSI300 has risen 35.4 per cent. The Shanghai stock index is above its 50-day moving average and above its 200-day moving average.

(With inputs from agencies.)