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Fresh hope of reforms pushes A shares to record day's trading

By XIE YU (China Daily) Updated: 2015-05-27 08:59

Chinese investors traded a record-breaking 2.15 trillion yuan ($352.4 billion) worth of A shares on Tuesday, on continued optimism that the government would come out with more measures to boost the economy.

Sentiment was also buoyed by hopes that the Shanghai Composite may soon be a part of the top global indexes. The benchmark extended gains for the sixth day, adding 2 percent to close at 4,910.9 points, with turnover above 1 trillion yuan for the third consecutive day. Chinext, China's Nasdaq style board for high-tech startups with the Shenzhen bourse, soared by 4.33 percent to close at 3,618.23 points.

Aviation and traffic equipment, technology and consumer stocks led the gains on Chinese bourses. Nearly 400 stocks rose by the 10 percent daily limit in Shanghai and Shenzhen. China Shipbuilding Industry Co and AVIC Helicopter Co paced gains by defense shares after the government published a white paper on military strategy that charted a bigger role for the navy.

One of the world's leading index providers FTSE Russell said on Tuesday that it will launch two transitional indexes which include China A shares. FTSE said it is a step that paves the way for China-listed shares to later be included in its emerging markets benchmark, which are tracked by many offshore fund houses.

Analysts said the mutual recognition of funds will introduce fresh liquidity to both the Hong Kong and mainland markets and further bolster the bull market. Mainland and Hong Kong authorities approved cross-border sales from July 1. The initial quota will be a total 600 billion yuan, split evenly in each direction.

The Ministry of Finance announced cuts in import duties on Monday to boost domestic spending. Import tax will be slashed by half on average, on items including suits, fur garments and shoes from June 1.

The National Development and Reform Commission on Monday rolled out investment plans covering 1,043 projects under the public-private-partnership model, designed to help cover financing shortfalls facing local governments.

"We are bullish on the market for the next two to three months, based on the stable economy and further reforms from the central government," An Wei, an analyst with China Securities, said in a research note on Monday, adding that the brokerage was overweight on high-end equipment manufacturing firms and the utilities sector in the short term.

The Shanghai Composite has surged 142 percent over the past year, after the central bank cut interest rates three times since November to support the economy, margin trading jumped to a record and an exchange link between Shanghai and Hong Kong started.

The Hang Seng Index rose 0.9 percent to 28,249.9 points in Hong Kong, with turnover expanding to HK$200.2 billion ($25.8 billion), from HK$124.5 billion on the last trading day.

Citi Securities said the mutual recognition will favor the Hong Kong market as it opens up a huge market for Hong Kong's competitive fund products, and it expects the HSI to reach 32,000 points by the middle of next year.

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