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Bloomberg
Investors are snapping up Chinese financial assets, encouraged by progress on trade and signs that the world’s second-largest economy may be stabilising.
Improving confidence helped stoke a 0.5% rally in the yuan on Tuesday, pushing it to its strongest level since early August. The currency punched past the key 6.95-per-dollar level, and traded on the strong side of its 200-day moving average for the first time since May. The CSI 300 Index of stocks closed at an almost two-year high as volume jumped.
The return of risk appetite in China comes amid growing optimism that Beijing and Washington may sign an initial deal on trade as soon as next week. Momentum is also improving in China’s economy, with recent data showing a recovery in the nation’s manufacturing sector continued in December.
“Risk sentiment is strong onshore,†said Tommy Xie, an economist at Oversea-Chinese Banking Corp. “There are signs of bottoming out in the economy and a more flexible monetary policy.â€
The Chinese trade delegation plans to sign the first phase of its trade deal with the US in Washington on January 15, people familiar with the matter have said.
Chinese investors are also expecting more support from the central bank ahead of a large liquidity shortage in January. A previously announced cut to commercial banks’ reserve requirement ratio came into effect, unleashing about $115 billion in funds. “We expect the economy’s strength to continue in the coming months,†Qian Wan, who covers Greater China for Bloomberg Economics in Hong Kong, said.