Financials lift China stocks

As optimism on economic recovery from the Covid-19 pandemic prompted fresh buying in financials and cyclical stocks, while worries over policy tightening continued to weigh on sectors with lofty valuations.

“The trend of China’s policy tightening is quite evident and definite, though the PBOC would refrain from sudden and fast tightening with an aim to provide stability for the market,” said Zheng Zichun, an analyst with AVIC Securities.

“We now favour cyclical companies, including those in petroleum and chemical, nonferrous metals, digging and financial industries,” he added.

China’s central bank said it would prioritise policy stability and avoid making sudden shifts, while providing the support needed for a continued economic recovery in 2021.

High-flying sectors including consumer and new energy firms continued to sag as tightening fears weigh.

Market reaction to latest headlines on Sino-U.S. relations was quite muted.

Wally Adeyemo, President Joe Biden’s nominee for the No. 2 job at the U.S. Treasury, vowed to crack down on authoritarian governments and fight unfair economic practices in China and elsewhere, while working to rectify economic inequality at home.