China blue-chips rebound, expectations of inflows lend support

SHANGHAI, July 5 (Reuters) – China’s blue-chips snapped a
three-day losing streak on Wednesday, helped by a wider quota
for Hong Kong institutional investors and a cabinet paper
promoting the use of commercial pension money in capital
markets.

The blue-chip CSI300 index rose 1.1 percent, to
3,659.68 points, while the Shanghai Composite Index
gained 0.8 percent to 3,207.13 points.

An index tracking the 50 most representative blue-chips in
Shanghai, dubbed China’s “nifty 50”, rebounded 1.5
percent.

Commercial pension funds are encouraged to invest in stocks,
bonds and funds, in order to provide long-term stable support
for the healthy development of capital markets, a policy paper
dated July 4 from China’s cabinet showed.

The policy is expected to bring more long-term funds into
the stocks market, benefiting the blue-chips, favoured by
institutional investors looking for solid fundamentals.

The mainland stock market also drew support from China’s
move to hike the quota under the Renminbi Foreign Institutional
Investor (RQFII) scheme for Hong Kong to 500 billion yuan
($73.58 billion) to further meet their demand for yuan asset
allocations.

As a pioneer to promote yuan internationalisation, Hong Kong
was given a 270 billion yuan quota under the RQFII scheme in
2011.

“The robust run-up in big-caps is not over yet, and the
RQFII hike could have a positive impact on the (mainland) stock
market,” said Zhang Qi, a Haitong Securities analyst.

Sectors rallied across the board, with financials
leading the advance.

The policy paper mentioned above helped lift the shares in
insurers most, with bellwether New China Life Insurance
surging 7.3 percent to end at an 18-month high.
($1 = 6.7952 Chinese yuan)
(Reporting by Luoyan Liu and John Ruwitch; Editing by Richard
Borsuk)

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