China investors welcome economic stimulus, signs of a thaw in trade relations with US

China's stocks rose on Wednesday on the announcement of major domestic economic stimulus measures and a guarded breakthrough in trade relations with the US.

"Investors have anticipated policies of such weight and have digested them," said Li Qiusuo, an analyst with China International Capital Corp. "The policy effect will be longstanding, with the future becoming a bit more certain. The market will continue to be supported mainly by tech sector in the first half, but in the second half, consumption-related shares are expected to be the driving force."

Chinese officials today announced a sweeping series of measure to widen the supply of money, reduce interest rates, stoke consumer spending and stabilize an economy threatened by US tariffs.

In addition, Chinese and the US announced their trade officials will begin meetings in Switzerland later this week in talks aimed at lessening trade tensions.

On the rise with more certainty

The Shanghai Composite Index rose 0.8 percent to end at 3,342.67 on Wednesday, while the Shenzhen Component Index increased 0.61 percent. The Hang Seng index in Hong Kong was also up slightly, though investors in Asia remained somewhat cautious because of past flip-flopping US administration policy stances.

To shore up the economy in face of the US trade war, China cut its seven-day reverse repurchase rate to 1.4 percent from 1.5 percent, which will lower the cost of borrowing,

The People's Bank of China, the nation's central bank, also dropped the amount of cash banks must hold in reserves by 50 basis points, unleashing additional liquidity of 1 trillion yuan (US$138.6 billion) in the economy.

Government officials additionally assured funding to key sectors, including technology, real estate and elderly care.

As a result of the actions, interest rates on five-year loans for first-time homebuyers will be trimmed to 2.6 percent from 2.85 percent, and the amount of cash that auto-financing firms must hold in reserves dropped to zero from 5 percent.

"The policy package is more focused this time, with support for targeted industries like autos, tech, consumption and real estate," Li said. "We will advise investors to stay calm and observe market movements with caution."