Chinese stock markets enjoy best day’s trading in two years as Beijing acts to offset trade war risks

Beijing has announced plans to boost domestic consumption in a bid to bolster economy from escalating trade war tension with US

China’s stock markets surged on Friday before a long holiday weekend, with investor sentiment boosted by hopes that a government effort to boost domestic demand could help offset effects of an escalating trade war.

Donald Trump escalated tensions between the US and China on Monday when he announced plans to impose tariffs on $200bn (£152bn) more in Chinese goods starting next week.

The tariffs will start at 10 per cent, beginning Monday of next week, and then rise to 25 per cent on 1 January, and will potentially raise prices on goods ranging from handbags to bicycle tires.

China then said it had no choice but to retaliate with countermeasures in order to “safeguard its legitimate rights and interests and the global free trade order”.

However, investors were undaunted by the latest spat and at the close on Friday, China’s blue-chip CSI300 index rose 3 per cent, its biggest one-day gain since May 2016, to end at 3,410.49 points.

The Shanghai Composite Index gained 2.5 per cent to 2,797.48 points. It was the Shanghai index’s best week since March 2016.

“Investors are hunting bargains in banking and real estate stocks which are trading at low valuations,” said Chen Xiaopeng, an analyst with Sealand Securities, adding that any impact from Sino-US trade frictions were already priced into the market.

Chen said that market participants also cheered news of new State Council guidelines on improving domestic consumption, which helped lift consumer firms.

A detailed document issued on Thursday by the State Council, China’s cabinet, ordered policies and resources to be geared towards sectors including tourism and sports to help give a broad-based boost to domestic consumption.

Strength in China’s stock markets was matched by strength in the yuan, which was on course for a rare weekly gain, buoyed by an easing dollar.

Reuters