China Stocks rise on upbeat China factory surveys

Headline indices of the Mainland China equity market closed higher on Monday, 1 April 2019, as sentiment for equities bolstered by release of stronger-than-expected China's factory activity in March and amid optimism about U.S.-China trade talks. At closing bell, the benchmark Shanghai Composite Index added 2.58%, or 79.60 points, to 3,170.36. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 3.57%, or 60.53 points, to 1,755.67. The blue-chip CSI300 index rose 2.62%, or 101.59 points, to 3,973.93.

Investors risk sentiment rose after official data on Sunday showed that factory activity in China, Australia's biggest trade partner, unexpectedly grew for the first time in four months in March, soothing fears of an economic downturn. On Monday, the private-sector Caixin survey showed a similar trend.

China's official Purchasing Managers' Index, a measure of factory activity, rose to 50.5 in March from the previous month's contraction and three-year low of 49.2, according to data released by China's National Bureau of Statistics. The growth was likely driven by seasonal factors as factories ramped up production after February's Lunar New Year holidays. Factory output also grew at its fastest pace in six months in March, China's National Bureau of Statistics reported, but export orders shrank for the 10th straight month amid slowing global growth and as collateral damage in the trade spat the United States.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) came in at 50.8 for March. A reading below 50 signals contraction, while a reading above that level indicates expansion. Markit and Caixin said in a joint press release that staffing levels at factories rose in March to mark their first expansion since October 2013. Some firms also hired additional workers to support greater production and new business developments, they added. The Caixin PMI is a private survey focused on smaller businesses and offers a first glimpse into the operating environment.

Meanwhile, risk sentiments also bolstered amid signs of progress in US-China trade talks. Beijing said it would continue to suspend additional tariffs on US vehicles and auto parts after April 1 in a goodwill gesture after Washington delayed tariff hikes on Chinese imports. A delegation led by Vice-Premier Liu He will be in Washington this week for another round of talks.

CURRENCY NEWS: China's yuan strengthened against the U.S. dollar on Monday. The central parity rate of the Chinese currency renminbi, or the yuan, strengthened 142 basis points to 6.7193 against the U.S. dollar Monday, according to the China Foreign Exchange Trade System.

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