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China stocks extend rally as traders brush off virus concerns

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Chinese stocks extended their rally on Tuesday with traders shaking off concerns that the growing coronavirus outbreak in the US could endanger a global economic recovery.

The CSI 300 of Shanghai- and Shenzhen-listed shares added as much as 2.1 per cent, taking gains over the past week to more than 13 per cent. Hong Kong’s Hang Seng index, which entered a bull market on Monday, jumped shortly after opening but by the afternoon was down 0.5 per cent.

China’s equities market has been supported in recent days by state-run media, which has encouraged the country’s important retail trader base to pile in.

Traders said there were indications that global investors were now also buying into the China rally. “The market is still relatively cheap so global fund managers have room to increase their exposure,” said Kenny Wen, a strategist at Everbright Sun Hung Kai. “It may have room to go further.”

Futures trading tipped Wall Street’s S&P 500 and London’s FTSE 100 both to fall 0.2 per cent when US and UK markets open, having initially pointed to gains.

Overnight, the S&P 500 climbed 1.6 per cent and the tech-heavy Nasdaq closed at an all-time high after traders returned from a three-day holiday. The fifth positive session in a row for US markets came despite a surge in Covid-19 cases in the country, which could dim hopes of a V-shaped global economic recovery.

The country reported more than 47,000 new infections on Monday with the percentage of people testing positive for the virus hitting its highest level in two months. 

Investors said a furious rally in Chinese shares — which rose 5.7 per cent on Monday for their biggest daily gain since February last year — had rippled across markets and reinforced hopes that a rebound in the world’s second-biggest economy would boost demand for global exports.

“Many equity investors see China as a leading indicator for a revival in global GDP growth,” said Neil MacKinnon, global macro strategist at VTB Capital. But “while China is recovering it is not strong enough on its own to underpin decisive growth for the other major economies”.

The Chinese currency also added to recent gains against the dollar. The onshore renminbi, which is permitted to trade in a narrow band, strengthened 0.1 per cent to a four-month high of 7.0145 against the US currency.

Elsewhere in Asia, South Korea’s Kospi index slipped 0.8 per cent. Samsung Electronics slid 2.2 per cent despite the smartphone and computer chips maker projecting that second-quarter earnings would come in ahead of estimates as a global homeworking trend due to coronavirus propels demand.

Japan’s Topix dropped 0.6 per cent after official data showed that wage growth in the country continued to weaken in May.

Australia’s S&P/ASX 200 was up 0.3 per cent after the central bank held its main cash rate unchanged at 0.25 per cent.

In commodities, gold dropped 0.1 per cent to $1,783.10 per ounce. Crude oil prices were down slightly with Brent, the international marker, 0.7 per cent lower at $42.82 a barrel while US benchmark West Texas Intermediate was down 0.7 per cent at $40.35 per barrel.

The yield on the US 10-year Treasury note, viewed as a haven in times of market uncertainty, was little changed at 0.671 per cent.

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