(Bloomberg) -- Chinese stocks kicked off the month on a high note, with traders encouraged by signs that officials will increase stimulus to support the nation’s slowing economy. The yuan advanced after the central bank set the fixing at a stronger-than-expected level.
The Shanghai Composite Index rose 1.1 percent as of 10:27 a.m. local time, set for the first three-day rising streak in more than two months. Brokerages jumped, while technology stocks were among the best performers onshore and in Hong Kong. The Hang Seng China Enterprises Index jumped 1.4 percent. The yuan strengthened 0.07 percent to 6.9691 per dollar.
China needs to take timely steps to counter the increasing downward pressure on economic growth, according to a statement from a Politburo meeting Wednesday chaired by President Xi Jinping. Separately, securities regulators have asked brokerages to help relieve liquidity pressure for listed private companies, the Securities Times reported, without specifying where it got the information.
"The politburo meeting remarks about reinvigorating the capital market showed the top leadership is caring for the market," said Shen Zhenyang, a Shanghai-based analyst with Northeast Securities Co. "That’s boosting sentiment."
Officials have announced a slew of measures in recent weeks to stem a rout in mainland equities that has set the Shanghai index on course for its worst year since 2011. The gauge is among the world’s worst-performing major indexes in 2018, tumbling more than 20 percent, as trade relations with the U.S. soured, the yuan weakened and the Chinese economy slowed faster than expected. Data this week showed China’s manufacturing sector expanded at a slower pace last month.
The yuan was poised to rise for the first time in four sessions. The currency this week dropped to a decade-low, moving closer to the key level of 7 per dollar, and putting spotlight on capital outflows from China. Policymakers will likely allow the yuan to hit 7 within the next six months without conducting heavy intervention, Goldman Sachs Group Inc (NYSE:GS). said before Thursday’s fixing.
“The yuan fixing suggests the PBOC may be doing a bit of tug of war with market forces, and is still pulling to resist the yuan breaking 7,” said Christy Tan, head of markets strategy at National Australia Bank in Singapore. “But we may be at the tail end of this and the PBOC doesn’t look like it will apply booster force against where the market is tugging at.”
In Hong Kong, the Hang Seng Index rallied 1.4 percent, with Internet giant Tencent Holdings Ltd. set for its biggest two-day gain since July 2015. Stocks in the city capped a six-month losing streak in October, the worst in 36 years.