China stocks soar on policy support hopes

Mainland stock markets surged on Friday before a long holiday weekend, with investor sentiment boosted by hopes that a government effort to boost domestic demand could help offset the effects of the escalating trade war with the US.

At the close, the blue-chip CSI300 index rose 3.0 percent, its biggest one-day gain since May 2016, to end at 3,410.49 points.

The Shanghai Composite Index, meanwhile, gained 2.5 percent to 2,797.48 points, its best week since March 2016.

“Investors are hunting bargains in banking and real estate stocks which are trading at low valuations,” said Chen Xiaopeng, an analyst with Sealand Securities, adding that any impact from China-US trade frictions were already priced into the market.

Chen said that market participants also cheered news of new State Council guidelines on improving domestic consumption, which helped lift consumer firms.

A detailed document issued on Thursday by the State Council, China’s cabinet, ordered policies and resources to be geared toward sectors including tourism and sports to help give a broad-based boost to domestic consumption.

Asian shares stumbled in holiday-thinned trading on Monday as China’s decision to cancel talks with the US reinforced fears of a protracted trade war with neither side willing to back down.

Most of Monday’s limited action was in currencies, as share markets in major Asian centers including Japan, China and South Korea were closed for national holidays.

Investors were squarely focused on the China-US trade war as China added $60 billion worth of US products to its import tariff list, retaliating against US duties on $200 billion worth of Chinese goods that came into effect on Monday.

So far this year, both the Shanghai stock index and the CSI300 are down 15.4 percent, while China’s H-share index listed in Hong Kong has fallen 5.5 percent. Meanwhile, Shanghai stocks have risen 2.65 percent this month.