Mainland shares have best week in two years

Major stocks on the Chinese mainland posted the biggest weekly gain in two years on Friday, despite lingering trade uncertainties with the US.

Stable economic growth and improved financial liquidity has provided solid support for the A-share market. In June, China’s exports unexpectedly accelerated, sending out a positive sign for the country’s economy.

Economists have raised their forecasts for China’s 2018 GDP growth to 6.6 percent from 6.5 percent, according to Reuters poll results released on Thursday. They expect the People’s Bank of China, the country’s central bank, to cut the reserve requirement ratio by another 100 basis points in the fourth quarter, so as to cushion the economy from the impact of a potential allout trade war.

Over the past week, the benchmark Shanghai Composite Index surged 3.06 percent, ending seven straight weeks of falls, while the smaller Shenzhen Component Index jumped 4.66 percent. Both indexes notched the biggest weekly gains since June 2016.

Last week, the market capitalization of shares on the Shanghai bourse rose by 3.39 percent to 30.01 trillion yuan ($4.49 trillion).

Securities analysts predict that major A shares could continue tumbling early this week, but that they will likely rebound later, as the A-share market is currently being undervalued and as investors have started to shift focus to economic fundamentals from trade wars.

In addition, investors can profit from the coming third-quarter earnings season, which is expected to be a strong one for Chinese companies.

As of Saturday, four companies on the Shanghai and Shenzhen bourses had released their earnings forecasts for the third quarter. All of them are upbeat.

Steel shares are worthy of attention, as firms in this sector are expected to post solid growth in profits amid steel price hikes as a result of strong demand. Shanghai benchmark steel rebar futures prices rose for a fifth day to hit 3,995 yuan a ton, their highest level since September 4, 2017.

Trade uncertainties will continue bolstering defensive stocks such as food and liquor this week, according to analysts.