March 2, 2020 / 8:46 AM / a month ago

China stocks rebound as dismal data fuels stimulus hopes

* Shanghai shares up 3.2%, largest gain since March 2019

* Blue-chips rally 3.3%; infrastructure, housing stocks jump

* Market sees stimulus after record factory activity contraction

SHANGHAI/HONG KONG, March 2 (Reuters) - China shares rose more than 3% on Monday after last week’s steep losses, as bleak economic data fuelled hopes Beijing would roll out more measures to support the world’s second-largest economy, while a decline in new coronavirus cases also helped sentiment.

Infrastructure and real estate stocks led the bounce-back, with Shanghai shares up 3.2%, its biggest since late March 2019, while the blue-chip CSI300 index rallied 3.3%, its best since last May.

On Friday, fears that the fast-spreading coronavirus cases outside of China could turn into a pandemic, had sent global equity markets tumbling. Last week, both the indexes dropped 5%.

Data released over the weekend showed China’s factory activity contracted at the fastest pace ever in February, even worse than during the global financial crisis, highlighting the colossal damage from the virus outbreak.

The official Purchasing Managers’ Index fell to a record low of 35.7 in February from 50.0 in January, the National Bureau of Statistics said on Saturday, well below the 50-point mark that separates monthly growth from contraction.

On Monday, a private survey showed factories were dealt a devastating blow last month as the epidemic triggered the sharpest contraction in activity on record, with the health crisis paralysing large parts of the economy.

Real estate and infrastructure stocks, sensitive to China’s stimulus package as they had been used to provide a floor to the economy in the past, including during the 2008 global financial crisis, shined on Monday.

The SSE industrials sector and the SSE properties subindex both ended more than 5% higher.

Infrastructure stocks, which have an advantage in terms of low valuations and absolute prices, rallied as investors expected Beijing’s policy support to hedge the virus impact on the economy, said Wang Mingli, executive director of Youpu Investment, a Shanghai-based private equity fund.

From a long-term perspective, the A-share market is worth investing, given China’s increasing comprehensive strength, which could be seen in its better control of the outbreak than any other countries, Wang said.

Chinese policymakers have implemented a raft of measures to support the economy jolted by the outbreak that is expected to have a devastating impact on the first-quarter growth.

Foreign investors, seen as a key player as Beijing further opens up its capital markets, came back after six sessions of net selling, purchasing nearly 7 billion yuan worth of A-shares.

Adding to investor optimism was a drop in the cases of coronavirus in the country. The central Hubei province, the epicentre of the country’s coronavirus outbreak, reported less than 200 cases of new infections for the first time since January.

Excluding the new infections in Hubei, there were only six new cases in mainland China, the lowest since last month. (Reporting by Luoyan Liu and Noah Sin; Editing by Subhranshu Sahu)

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