Stocks rise as Beijing seeks to boost economy with US$73.6 billion cash injection

Shares in Hong Kong and mainland China rose on Tuesday after the Chinese government moved to lift the economy with a series of new measures amid the trade tensions with the United States and a scandal in the pharmaceutical sector.

The State Council, the state cabinet, said on Monday it would adopt a “more proactive fiscal policy” and would speed up raising and spending 1.35 trillion yuan (about US$199 billion) for local government, designated to be spent on infrastructure.

Beijing also injected 500 billion yuan (US$73.57 billion) into the banking system as it sought to aid a recovering yuan and the scandal-hit pharmaceutical sector.

“A-share investors believe the government is going to use infrastructure investment to boost the economy, and counter the negative impact of the trade war with the US,” said Francis Lun, chief executive of Geo Securities.

The benchmark Shanghai Composite Index rose by 1.6 per cent, or 46.02 points, to 2,905.56, while the CSI 300 Index gained by 1.59 per cent, or 55.96 points, to 3,581.71. The ChiNext gauge of smaller companies finished 0.53 per cent, or 8.64 points, higher at 1,629.61.

He said a 400-point boom in mainland markets on Tuesday was led by infrastructure companies. “The central bank injected 500 billion yuan into the banking system, and issued directives that the banks should buy A minus corporate bonds to help the liquidity of these second-line companies,” said Lun.

China Railway rose by 10.5 per cent to HK$6.74 and China Rail Construction jumped by 13.7 per cent to HK$9.4. Anhui Conch Cement gained 8.2 per cent to HK$49 and China Communications Construction jumped by 11.9 per cent to HK$8.4.