Chinese shares surge after trade talk
China stocks skyrocketed on Monday with the three major indexes all surging over 5 percent and turnover hitting the highest in more than three years.
The rise was mainly driven by US President Donald Trump's announcement he would delay an increase in tariffs on Chinese goods after a week of trade talks in Washington between American and Chinese officials.
"As a result of these very productive talks, I will be delaying the US increase in tariffs now scheduled for March 1," he tweeted.
"Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement."
The benchmark Shanghai Composite Index rose 5.6 percent to close at 2,961.28 points, the highest since June 2018. The smaller Shenzhen Component index also soared 5.59 percent to 9,134.58 points, and the bluechip CSI 300 index jumped 5.95 percent to 3,729.48 points.
Total turnover on the Shanghai and Shenzhen bourses hit 1.04 trillion yuan (US$155.42 billion), the highest since December 2015.
Stocks of over 300 companies listed on the A-share markets surged by the daily limit of 10 percent. Almost all A-share companies posted gains. Stocks of only 13 companies dipped.
Non-bank financial stocks such as brokerages and insurance companies were among the biggest gainers, and stocks related to venture capital and fintech also jumped.
And stocks of nearly 20 companies related to Huawei Technologies posted sharp rise, hitting the daily 10 percent cap after Huawei on Sunday unveiled its foldable 5G smartphone.
China's markets still have the momentum to extend the rise until March, with positive factors such as the accelerated reform of the domestic capital market system bolstering market confidence, according to Capital Securities.
Gao Ting, head of China strategy at UBS Securities, said: "To a large extent we think the rebound is justified. However, the CSI300's recent rapid gain of 17 percent puts the market a long way ahead of fundamentals.
"In our view，several near-term risks are worth noting," he said.
Gao expected a period of consolidation and preferred sectors including banks, food and beverages, construction, railway equipment, renewable energy, nuclear power operators, duty-free firms and airports.
Market expectations on policies such as tax cuts and consumption-boosting measures will face a reality check during the National People’s Congress in March.
The upcoming "two sessions" — the National People’s Congress and Chinese People's Political Consultative Conference — may continue tax cuts and fee reductions, according to Yang Ouwen, a senior analyst at Chuancai Securities.
In the short term, the gains are expected to continue with positive market fundamentals and policies, while the duration of the rebound still depends on the improvement in fundamentals, Yang said in a note.
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