September 20, 2017 / 7:23 AM / 3 months ago

China stocks firm on business optimism, green car craze

SHANGHAI, Sept 20 (Reuters) - China stocks edged higher on Wednesday, bolstered by strong gains in consumer stocks and “new energy” car manufacturers, with sentiment propped up improving business confidence and expectations that Beijing will maintain stability in financial markets ahead of a key party congress.

The blue-chip CSI300 index rose 0.3 percent, to 3,842.44 points, while the Shanghai Composite Index also gained 0.3 percent to 3,366.00 points.

Both indexes have been trading narrowly over the past three weeks.

Chinese President Xi Jinping has told security officials ahead of next month’s key Congress of the ruling Communist Party that stability is an absolute principle that needs to be dealt with using “strong hands”.

Beijing typically intervenes via state-backed investment funds and window guidance to brokerages and fund managers.

Meanwhile, UBS Securities published a survey suggesting Chinese business leaders overall hold a positive outlook for the next six months, with the majority of firms planning to increase capital expenditure over the next year.

“We believe higher optimism expressed by large firms is in part due to ongoing capacity cuts and production curbs as well as stronger environmental protection, which tends to benefit large companies in the impacted industries,” UBS strategist Gao Ting wrote.

Material firms and consumer stocks led the gains as investors expect the upcoming Golden Week to boost consumer demand.

Real estate shares were subdued, after the central bank backed mortgage rate hikes in Beijing.

“Green” car manufacturers and players in the supply chain extended their surge in a frenzy for “new energy” vehicles.

Chinese automaker BYD Co Ltd, backed by U.S. investor Warren Buffett, shot up 8 percent on Wednesday, having gained 24.1 percent since talk began of a ban on petroleum powered cars. (Reporting by Luoyan Liu and John Ruwitch; Editing by Jacqueline Wong)

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