March 5, 2019 / 7:50 AM / 9 months ago

China stocks gain on policy support

* SSEC +0.9 pct, CSI300 +0.6 pct

* China lowers taxes, boosts spending and lending

* But concerns linger as China cuts GDP growth target

HONG KONG, March 5 (Reuters) - Chinese stocks rose on Tuesday after Beijing unveiled plans to cut taxes and increase public expenditure and lending to rev up its slowing economy. ** At the close, the Shanghai Composite index was up 0.9 percent at 3,054.25 points, while the blue-chip CSI300 index rose 0.6 percent. ** CSI300’s financial sector sub-index was lower by almost 0.1 percent, the consumer staples sector was flat, while healthcare shares rose 0.6 percent. ** The smaller Shenzhen index ended up 2.3 percent and the start-up board ChiNext Composite index was higher by 3.5 percent. ** China will cut nearly 2 trillion yuan ($298.31 billion) in taxes and fees for companies, Chinese Premier Li Keqiang said at the National People’s Congress on Tuesday. ** The special bond issuance quota for local governments, a key source for infrastructure investment, has been set at 2.15 trillion yuan, according to the finance ministry. Last year’s quota was set at 1.35 trillion yuan. ** Beijing will also step up targeted cuts in the reserve requirement ratio for smaller and medium-sized banks with an aim to boost lending to small companies by large banks by more than 30 percent, said Li. ** Market reaction was muted as Li, in the same address, said China will target an economic growth of 6.0 to 6.5 percent in 2019, less than the 6.6 percent gross domestic product growth reported last year. ** The effectiveness of the flagship tax cut policy is also in doubt. “We don’t see (how) the tax cut could turn the economy around. It never did in the past,” Larry Hu, an economist with Macquarie, wrote in a note. ** The Chinese premier also vowed to reform and open up the financial sector - an area which top banking regulator Guo Shuqing said China can “absolutely” reach an agreement on with the United States. ** Reports suggesting that Beijing and Washington were closing in on a trade agreement sent Chinese stocks to their near nine-month highs on Monday. ** But analysts at China Galaxy Securities cautioned long-term investors against chasing the rally. “If valuations do not rise, (stock) prices are rising because of an improvement in risk appetite… there is no support for the market’s rise in terms of fundamentals,” they wrote in a note. ** Sino-U.S. trade talks have been difficult but the two sides have achieved a breakthrough in some areas and will continue their negotiations, Chinese Commerce Minister Zhong Shan said on Tuesday. ** Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.1 percent, while Japan’s Nikkei index closed down 0.4 percent. ** So far this year, the Shanghai stock index is up 22.5 percent. Shanghai stocks have risen 3.9 percent this month. ** The Shanghai stock index is above both its 50-day moving average and 200-day moving average. ** About 42.41 billion shares were traded on the Shanghai exchange. The volume in the previous trading session was 52.56 billion. (Reporting by Noah Sin; Editing by Subhranshu Sahu)

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