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China Stocks cheer risk-on after fiscal stimulus to shore up growth

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The Mainland equity market skyrocketed on Tuesday, 11 June 2019, as risk appetite buying boosted up after Chinese authorities appeared to back new measures to support the economy, offsetting U. S. Donald Trump's latest threat of more tariffs. Additionally, expectations for interest rate cuts globally have given investors a catalyst to re-enter China's market following disappointing performance in May. At closing bell, the benchmark Shanghai Composite Index spurted 2.58%, or 73.59 points, to 2,925.72, its biggest gain since May 10. The Shenzhen Composite Index, which tracks stocks on China's second exchange, advanced 3.71%, or 55 points, to 1,538.23. The blue-chip CSI300 index rose 3.01%, or 108.54 points, to 3,719.28.

The market mood was brightened after decision by Chinese authorities to back special-purpose issuances by local governments. The said on late Monday that special bonds sold by local governments will be allowed to bankroll construction of key projects and financial institutions will be encourage to provide additional funding. The move is an effort to accelerate financing of major projects through the issuances, which are used largely for infrastructure investment, including highways, gas and power supply and railways, which would help prop up a slowing economy.

Investors, meanwhile, appeared to ignore a continued rumble of hostile rhetoric from the U.

S. and over trade. China's foreign ministry on Tuesday said it would respond firmly if the U. S. insisted on escalating trade tensions, after U. S. on Monday said further tariffs on Chinese imports would take effect if the two don't reach a deal at a meeting of Group of 20 leaders later this month.

Chinese officials, however have not confirmed that will meet with president Trump at the meeting, to be held June 28-29. President Trump said Monday that if doesn't meet with him, additional tariffs will be placed on Chinese goods.

Construction-related stocks rallied after the said on Monday it would ease restrictions on the spending of proceeds from special sales and encourage banks to offer loans to projects funded by such debt. jumped by the 10% daily limit to 5.80 yuan and Railway Construction advanced 6.7% to 10.16 yuan. climbed 5.2% to 11.50 yuan.

Liquor distillers also gained on sign that overseas traders resumed purchases of Chinese stocks. surged 8.5% to 108.95 yuan and added 6.8% to 59.88 yuan.

CURRENCY NEWS: China yuan rose against greenback on Tuesday, after the central set the daily reference rate stronger than expected and the central bank's plan to issue bills in Hong Kong later this month. Prior to market opening, the of China (PBOC) set the midpoint rate at 6.8930 per dollar, 5 pips weaker than the previous fix of 6.8925. The official midpoint was 157 pips stronger than market expectation of 6.9087 per dollar. In the spot market, the yuan opened at 6.9175 per dollar and was unchanged at midday, 130 pips firmer than the previous late session close.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, June 11 2019. 16:32 IST