January 7, 2020 / 7:44 AM / 15 days ago

China shares close at 8-month high as Middle East concerns ebb

SHANGHAI, Jan 7 (Reuters) - China’s benchmark index closed at its highest level in more than eight months on Tuesday, resuming a rally prompted by hopes of a brighter trade outlook and more policy support, as worries over Middle East tensions eased.

** The Shanghai Composite index ended 0.69% higher at 3,104.80, its highest close since April 25, 2019. ** The country’s blue-chip CSI300 index gained 0.75% to its highest close since Feb. 5, 2018. ** Its financial sector sub-index added 0.61%, the consumer staples sector rose 2.15%, the real estate index gained 0.85% and the healthcare sub-index jumped 1.4%. ** Investors drew relief as there was no immediate escalation in tensions between Washington and Tehran. ** Energy shares underperformed after a rally on Monday as oil prices slid after analysts tempered expectations of a widespread conflict in the Middle East. The CSI300 energy index fell 0.79%. Brent crude futures fell 0.84% on Tuesday to $68.33 per barrel. ** The smaller Shenzhen index rose 1.31% and the start-up board ChiNext Composite index closed 1.79% higher. ** The recent rally in A-shares has been supported by hopes for a Phase 1 trade deal between Washington and Beijing to end a bruising trade war. ** “There is a greater chance of Sino-U.S. trade frictions improving this year, which will help to restore market confidence and boost the investment climate,” analysts at Fidelity said in a note. ** But raising questions about how China will meet a target of spending billions of dollars more on U.S. agricultural goods, China will not increase its annual low-tariff import quotas for corn, wheat and rice to accommodate stepped-up purchases of farm goods from the United States, local media quoted senior agriculture official Han Jun as saying on Tuesday. ** Fidelity analysts also said they expected monetary policy to remain broadly unchanged from 2019, with a bias toward targeted easing. ** Adding to expectations of support for markets, China’s Banking and Insurance Regulatory Commission said last week it would promote the conversion of household savings into long-term funds in China’s capital markets. ** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.69%, while Japan’s Nikkei index was up 1.60%. ** The yuan was quoted at 6.9527 per U.S. dollar, 0.35% firmer than the previous close of 6.9768. The currency briefly strengthened past 6.95 per dollar for the first time since Aug. 2. (Reporting by Andrew Galbraith; editing by Uttaresh.V)

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