China stocks end higher on strong industrial profits

SHANGHAI: Mainland China and Hong Kong stocks ended higher on Friday, outperforming regional peers, as strong industrial profit data lifted market sentiment, despite lingering worries over intensifying Middle East tensions.

Asian stock markets pared losses, as another delayed deadline in the Middle East war nudged oil prices lower, though there was still no end in sight to the unfolding energy crunch on the global economy.

At the market close, the benchmark Shanghai Composite index rose 0.63 percent, while the blue-chip CSI300 Index inched up 0.56 percent. However, for the week, the SSEC lost 1.1 percent to book its fourth straight weekly drop, while the CSI300 dropped 1.4 percent.

In Hong Kong, the benchmark Hang Seng Index gained 0.38 percent. The HSI fell 1.3 percent for the week to record its fourth consecutive weekly loss.

The slight strength came after China’s industrial firms reported stronger profit growth early in the year, reinforcing recovery signals in the world’s second-largest economy even as the Middle East war threatens global growth.

“While a prolonged Middle East conflict would pose material risks, we think China has significantly reduced its vulnerability to oil shocks in the past decade, and faces an opportunity to offer affordable green tech products and infrastructure solutions to nations seeking alternatives,” economists at Barclays said in a note. “We see oil shocks as less of a constraint for China’s modest policy easing, given continued weakness in domestic demand,” they said, maintaining their expectations of a 10-basis-point policy rate cut and a 50-basis-point reserve requirement ratio (RRR) reduction in the first half of this year.

Market participants will pay close attention to the March manufacturing activity data due next Tuesday for more clues on the impact on the broad economy from the Middle East war.

China is considering easing shareholding restrictions for some major investors, sources told Reuters, in a move aimed at broadening capital-raising options for commercial banks reeling from an economic slowdown.

On the Middle East front, US President Donald Trump said he will extend a pause on attacks against Iran’s energy plants into April and that talks with Iran were going “very well,” but an Iranian official pushed back, dismissing the US proposal as “one-sided and unfair.”