China stocks end higher after solid profit data

SHANGHAI, June 27 (Reuters) – China stocks recouped earlier
losses to end higher on Tuesday, but investors turned cautious
amid a strong rally in blue-chips after MSCI decided last weeek
to add 222 China-listed stocks to its Emerging Markets Index.

The blue-chip CSI300 index rose 0.2 percent, to
3,674.72 points, while the Shanghai Composite Index also
added 0.2 percent to 3,191.20 points.

Investors largely looked past news that profits at China’s
industrial companies surged 16.7 percent in May from a year
earlier, accelerating from April despite expectations of a
slowdown.

With the blue-chip index trading at the highest level since
early 2016, some investors aren’t sure if the index can run up
much further amid signs Beijing will continue to keep liquidity
conditions relatively tight.

Citing “relatively high” liquidity levels in the banking
system, China’s central bank on Tuesday skipped open market
operations for a third consecutive day, as short-term borrowing
rates have eased recently.

“The central bank doesn’t want the market to form
expectations of loose liquidity,” Wang Gang, strategist at
Huajin Securities, wrote.

“In the future, liquidly will remain relatively tight. Under
such a backdrop … there’s limited room for blue-chips to rise
further.”

Wang said investors were also bracing for the mid-year
earnings season starting next week to reassess their portfolios.

Sector performance was mixed.

Gains were led by bank stocks, while real estate
stocks dragged behind after jumping nearly 9
percent during the previous two sessions.
(Reporting by Luoyan Liu and John Ruwitch; Editing by Richard
Pullin)


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