Market Cheers Package, COVID Control

An investor examines the stock price of a brokerage in Fuyang, Anhui province. [Photo by Wang Biao/For China Daily]

Bullish sentiment characterized the A-share market on the last trading day of May, with benchmarks consolidating gains amid more economic stimulus policies and better control of the latest COVID-19 resurgence, insiders said Tuesday.

The Shanghai Composite Index gained 1.19% while the Shenzhen Component Index closed up 1.92%. The tech-heavy ChiNext in Shenzhen jumped 2.33%.

The value of trade on the Shanghai and Shenzhen stock exchanges totaled 930 billion yuan ($140 billion). The northern capital – the amount of capital used by foreign investors buying on the A-share market through the stock connection mechanisms between Shanghai, Shenzhen and Hong Kong – reported a net inflow of 14 billion yuan.

The 33 measures released by the State Council, China’s cabinet, on Tuesday gave the stock market a boost. The central government reiterated its determination to boost economic growth through fiscal support, monetary policy adjustments, consumption and a stable supply chain.

Thanks to the green energy development plan jointly released by the National Development and Reform Commission and the National Energy Administration on Monday, A-grade wind power companies recorded the highest daily increase on Tuesday. 4.2% on average.

As the Shanghai municipal government announced on Tuesday that the city would resume normal production and life on Wednesday, stocks of consumer-related companies rallied. The food and beverage sector recorded an average increase of 3.25% on Tuesday, the consumer electronics sector increased by 3.01% and the beauty care sector by 2.47%.

Listed public companies posted notable gains for the second day in a row on Tuesday, further supporting the indices, thanks to their strong market capitalization. More than 10 listed state-owned enterprises, including COSCO Shipping Technology, saw their prices rise to the 10% daily limit.

The rally came after the State Council on Friday released a work plan to further improve the quality of listed state-controlled companies.

Efforts should be made to develop flagship SOEs that are competitive and influential in the market. A number of industry leaders stand out from their peers with their talent pool, expertise, high-quality products and brand prestige, according to the plan.

Analysts at Guosheng Securities wrote to clients on Tuesday that they expect the pessimistic market mood to improve as the impact of the resurgence of the epidemic on trade diminishes and policies support are implemented more quickly. More capital, they wrote, would return to the stock market faster. Chances are high that A-share benchmarks will rebound in the medium to long term.

In an interview in late May, Vincent Mortier, chief investment officer of Amundi SA, a France-based asset management firm, suggested investors overweight Chinese stocks because of their medium-term value. Onshore Chinese stocks with exposure to domestic activities, including those in the consumer discretionary, industrials and healthcare sectors, will present the most opportunities, he said.

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