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China stocks flat as stronger airlines, resources offset by losses in banks
August 30, 2017 / 7:14 AM / 24 days ago

China stocks flat as stronger airlines, resources offset by losses in banks

SHANGHAI, Aug 30 (Reuters) - China stocks ended flat on Wednesday, as strong gains in airline operators and resources firms were offset by weakness in banking stocks with investors awaiting first-half results for some of the country’s biggest banks.

The blue-chip CSI300 index was unchanged at 3,834.30 points, while the Shanghai Composite Index was also flat at 3,363.63 points.

As the largely bright half-year company earnings season draws to a close, investors are pondering about the outlook and if the strong growth is sustainable.

Chinese brokerage Guosen Securities is bullish on China stocks, after the Shanghai market held firmly above the 3,300-point-mark this week, a level previously seen as a strong resistance.

“Economic recovery is expected to kick China’s A shares into a bull market,” Guosen analyst Yan Xiang said in its latest strategy report.

“Currently, we could be at the turning point of the economic cycle,” Yan said, citing strong economic data, robust commodity prices and modest inflation.

UBS, however, was less sanguine about the outlook.

Gao Ting, Head of China Strategy at UBS Securities, said: “We think earnings growth momentum likely peaked in H1, and with economic growth set to slow and margin pressure emerging, earnings growth should decelerate over the rest of the year.”

Still, Gao said he hasn’t seen any negative “catalysts that would bring down the market in the near term.”

Airline operators surged in both China and Hong Kong, as investors bet that the sector - typically burdened with heavy U.S. dollar debt - would benefit from a strong yuan, which on Tuesday strengthened and breached the psychologically important 6.6 per dollar level for the first time since June 2016.

Resources firms also helped lift the market, with an index tracking material players up 1.6 percent, as a weaker greenback generally makes dollar-priced metals cheaper for non-U.S. investors, boosting demand.

But banking stocks lost 0.9 percent following strong gains recently, with some investors pocketing gains before some of the nation’s biggest lenders release their half-year results on Wednesday after market close. (Reporting by Luoyan Liu and John Ruwitch; Editing by Shri Navaratnam)

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