Shanghai share index rallies to 12-month high following quarterly economic data indicating growth upswing

China’s stocks climbed for a second day, sending the benchmark gauge to a one-year high, as the economy grew at a pace topping analysts’ estimates, strengthening evidence of a firmer recovery in full swing.

The Shanghai Composite Index rose 0.3 per cent, or 9.52 points, to 3,263.12 at the close on Wednesday, finishing at the highest level since March 22, 2018. Carmakers paced the gains on expectations that the government will unveil plans that will ease license controls and encourage the purchase of new-energy vehicles. Hong Kong’s Hang Seng Index was little changed.

Data released by the National Bureau of Statistics bureau showed China’s economy grew 6.4 per cent in the first quarter, which beat the consensus projection of 6.3 per cent growth. Other key figures including industrial output and retail sales exceeded analysts’ estimates as well. That convinced traders that economic growth had bottomed, shifting their attention from a jump in borrowing costs in the interbank market that sent the overnight repurchase rate to a four-year high during the session.

“This confirms that China’s economic growth is bottoming out and this momentum is likely to continue going into the months ahead,” said Tai Hui, a strategist at JPMorgan Asset Management in Hong Kong. “The People’s Bank of China is likely to adopt a more patient stance in cutting the required reserve ratio and instead use money market instruments to adjust liquidity in the system. This dilemma between the better prospects of economic stabilisation and reduced likelihood of more policy stimulus is likely to split onshore sentiment.”

The Shanghai Composite has gained 31 per cent this year, making it the best-performing equity benchmark globally, as leading economic indicators including credit growth and purchasing managers’ index picked up and the stock-market regulator loosened trading restrictions to boost liquidity.

Carmakers were the biggest gainer across the board on Wednesday. BYD, FAW Car and Dongfeng Automobile all jumped by the 10 per cent daily limit. SAIC Motor added 6 per cent to 30.22 yuan.