China stocks end week higher as investors plough into blue chips

SHANGHAI, July 21 (Reuters) – China’s stocks fell on Friday
but ended the week higher, with demand for blue chips gaining
momentum amid a slump in small-cap stocks, as investors sought
firms with solid growth prospects and lower valuations.

The blue-chip CSI300 index fell 0.5 percent, to
3,728.60 points, while the Shanghai Composite Index lost
0.2 percent to 3,237.98 points.

For the week, the two indexes gained 0.7 percent and 0.5
percent, respectively, erasing losses earlier this week when
investors dumped start-ups stocks.

“Blue chips found favour with investors as they attach great
importance to performance and valuations at listed firms due to
curbed risk appetite amid tighter financial regulations and
liquidity conditions,” said Xu Wei, analyst with Hongxin
Securities.

Xu expects tighter regulations to continue as a largely
stable economy allows Beijing more leeway to tackle bubbles.

Among blue chips, Shanghai-listed China Molybdenum Co Ltd
, a major non-ferrous metals producer in China, has
gained 16.8 percent this week. The stock is up more than 45
percent so far this month.

China’s economy expanded 6.9 percent in the second quarter,
defying expectations for a slight loss of momentum in growth.

Fitch Ratings said on Thursday China’s renewed commitment to
contain financial risks signals a possible shift away from high
economic growth targets, though policymakers are likely to
remain cautious about tightening too aggressively.

China’s opening up its stock market to foreign investors by
the Shanghai, Shenzhen and Hong Kong connect programmes, as well
as by the MSCI’s decision to include China stocks, also helped
prompt a rotation into blue chips, Xu added.

U.S. index provider MSCI has agreed to add 222 China-listed
large-cap stocks to its Emerging Markets Index (EMI), tracked by
around $1.6 trillion. China Molybdenum is among
them.

In sharp contrast with strong gains in blue chips, the
tech-heavy start-up board ChiNext lost 3.2 percent
for the week, hovering around 30-month lows after a 5.1 percent
slump on Monday, as market participants shunned firms that
feature dim performance and higher valuations.

The index is almost 60 percent below a record high hit in
June 2015.

For the week, materials shares far outperformed the broader
market, with an index tracking those firms leaping 5
percent, after they forecast surges for mid-year earnings
growth, helped by expectations China would continue to push
supply-side reforms and keep its economy largely stable.
(Reporting by Luoyan Liu and John Ruwitch; Editing by
Jacqueline Wong)


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