China stocks rise as infrastructure spree offsets liquidity fears

China stocks rose on Friday as strong gains in the infrastructure sector offset concerns over tightening liquidity in the country’s banking system, increased regulation and fresh curbs on property investment.
The blue-chip CSI300 index rose 0.8 percent to 3,489.60 points, while the Shanghai Composite Index added 0.6 percent to 3,269.45.
Both indexes rose for the second week in a row. The CSI300 advanced 1.3 percent, while SSEC gained 1 percent.
Investors in China are being torn between data showing a resilient economy and fears that expected policy tightening, while gradual, will eventually lead to higher borrowing costs and stunt business activity.
Signs of tighter liquidity have been a focus this week, as cash conditions tightened on worries the central bank’s quarterly risk assessment at the end of this month would restrict lending in the interbank market.
Adding to the pressure, a central bank survey reinforced expectations that authorities may have to take more aggressive measures to cool the red-hot property market, even at the risk of dampening economic growth.
However, investors found some solace after index compiler MSCI said it was seeking feedback from market participants on whether or not to add Chinese A-shares to its China Index and emerging markets index. Investors continued to seek out heavyweight blue chips, which pay out generous dividends in cash.
China Shenhua, the country’s largest coal miner, surprised markets by announcing a hefty special dividend earlier this week, thanks to a surge in coal prices last year. The stock gained 15.6 percent for the week.
Investors also chased stocks related to China’s high-profile “One Belt, One Road” initiative, lending support to infrastructure stocks, which closed up 2.1 percent at a near 15-month high.
China will hold “One Belt, One Road” International Cooperation Summit in mid-May. The plan is a signature foreign and economic policy of Chinese President Xi Jinping, envisioning massive infrastructure spending to link China to the rest of Asia and Europe.
Property market
China’s land authority said on Friday it has banned registration of “abnormally-shaped” residential spaces such as extremely small rooms, effectively blocking the sale of such properties, as policymakers seek to stem market irregularities in the red-hot market.
China has intensified its crackdown on property speculators by rolling out much harsher measures in big cities, while extending curbs to nearby satellite cities in an effort to contain resurgent demand from frenzied homebuyers.
Recent weeks have seen the biggest wave of tightening of home purchases and lending rules since October, a sign that prices remain strong in the bigger markets.
Concerned that soaring prices could cause a nasty crash, policymakers ordered a slew of tightening measures in about 20 cities in October, although some analysts noted those measures were less severe than seen in previous cycles.
Price gains slowed for months after the measures were implemented, but the market started to pick back up again last month.
Official data also showed property sales unexpectedly surged in the first two months of the year.
Last Friday, China’s capital city slapped a barrage of unprecedented measures including hiking the down-payment ratio to as high as 80 percent for second homes, a significant move that has led to multiple cities following suit.
China has pledged to keep the property market stable in 2017, after a furious property boom last year that saw price gains soaring to a five-year high.
The central government recently has also ramped up the rhetoric with multiple top government bodies and officials reiterating that the country would control rapid flows of bank credit to the sector to contain risks.
While prices have inflated to record highs in big cities, China’s smaller third- and fourth-tier cities still largely face a gloomy housing glut.

Source: Arab News