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June 12, 2019

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Shanghai index surges on infrastructure gains

Shanghai stocks jumped more than 2.5 percent yesterday with growth led by infrastructure.

The Shanghai Composite Index gained 2.58 percent to close at 2,925.72 points.

On Monday, the central government allowed local governments to use proceeds from bonds as capital for major investment projects, including highways, gas and power supplies and railways, according to Xinhua news agency.

China ramped up the issuance of special local government bonds to support economic growth and maintain reasonable and ample liquidity in the market.

Special bonds

Local governments and financial institutions are encouraged to use special bonds and other market-based financing methods to support key areas and major projects such as the coordinated development of the Beijing-Tianjin-Hebei region and the construction of the Yangtze River Economic Belt.

It also called for a higher degree of marketization of local government bond pricing and increasing diversification for investors.

Institutions such as commercial banks, insurance companies and fund firms as well as individual investors are encouraged to invest in local government bonds, it said.

That would help “increase effective investment, improve economic structure, stabilize aggregate demand and maintain sustained and healthy economic development,” Xinhua said.

Japanese investment bank Nomura said in a research note yesterday that the company believes that “Beijing will likely step up its stimulus measures to stabilize financial markets and growth.”

In addition, UBS Securities said in a report that it expects stable liquidity conditions at the end of the first half of this year and acceleration of local government bond issues.

Xinjiang Qingsong Building Materials and Chemicals Group Co Ltd surged by the daily limit of 10 percent to 4.04 yuan (58 US cents) while Huaxin Cement Co Ltd jumped 8.72 percent to 19.45 yuan.


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