China stocks get some relief before Xi Jinping's state visit to the US

Investors got a bit of relief from mainland markets yesterday as equities chalked up gains ahead of President Xi Jinping's state visit to the US.

"A big systemic risk is fading out as much of grey-market financing has been cleaned up," said Yang Hai, a senior strategist with Kai Yuan Securities. "For the coming few months, investors could look into stocks which are potential beneficiaries of SOE (state-owned enterprise) reform."

The benchmark Shanghai Composite Index clawed back from early losses of more than 1 per cent to close 1.89 per cent higher at 3,156.54 points, while the blue-chip CSI300 Index closed at 3,308.247 points, up 1.75 per cent. The Shenzhen Composite Index climbed 3.55 per cent to 1,738.64 points.

Aerospace and defence stocks led the mainland rally. Five units under state-owned Aviation Industry Corp of China jumped by between 6.62 per cent and the 10 per cent daily limit after Japan approved a constitutional change that would permit troops to fight overseas for the first time since the second world war.

"While escalating territorial tensions may have helped beef up their shares, more investors were buying on high hopes of SOE reform," Yang said.

The electricity, resources, railway and defence sectors were among the main targets for the implementation of "mixed-ownership", which would see more private capital channelled into business operations, the National Development and Reform Commission said on Saturday.