China Market rises on economic recovery optimism

The China share market spurted on Monday, 6 July 2020, registering fifth straight sessions of gain, on hopes of a quick economic recovery, Beijing's continued reforms in the capital markets and ample liquidity. Meanwhile, buying was also supported by an article in a Chinese government-affiliated newspaper suggesting the possibility of further public support for equities.

At closing bell, the benchmark Shanghai Composite Index spurted 5.71%, or 180.07 points, to 3,332.88. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 3.9%, or 79.70 points, to 2,121.59. The blue-chip CSI300 index gained 5.67%, or 250.49 points, to 4,670.09.

China markets got a boost on the back of economic recovery optimism and as the recent coronavirus outbreak in Beijing helps investors realize the impact from a second wave of outbreak, if any, in the country would be very limited. Policy easing and continued reforms in the capital markets and a registration-based IPO system for the start-up board, also helped shore up investor confidence.

Adding fuel to the rally was a China's state media report published over the weekend said the A-share market had the basis and key elements for a bull market. It cited sound economic fundamentals, capital market reforms and continued fund inflows into Chinese shares. Foreign investors have been a bellwether in purchasing A-shares recently. On Monday, they bought about 16.4 billion yuan ($2.33 billion) worth of A-shares via the Stock Connect.

CURRENCY NEWS: The yuan was up against the dollar on Monday, despite softer mid-point fixing by central bank, as economic recovery optimism underpinned sentiment. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 7.0663 per dollar, 25 pips or 0.04% weaker than the previous fix of 7.0638. In the spot market, spot yuan was changing hands at 7.0534, 136 pips firmer than the previous late session close.

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