China stocks end week lower on liquidity worries, but post monthly gain

SHANGHAI, Jan 29 (Reuters) - China stocks recorded a weekly loss of more than 3% on Friday, as worries over tight liquidity conditions dented sentiment, although they posted monthly gains on increasing hopes of an economic recovery.

** The blue-chip CSI300 index ended 0.5% lower at 5,351.96, while the Shanghai Composite Index shed 0.6% to 3,483.07.

** For the week, CSI300 dropped 3.9%, while SSEC declined 3.4%.

** But, for January, the CSI300 was up 2.7%, while SSEC eked out 0.3%, as more investors poured money into the country’s mutual funds that invest in equities.

** Lingering concerns over tight liquidity rattled investors when the market hovered near multi-year highs, while bubble worries have prodded some investors to seek bargains in Hong Kong.

** With market rates already buoyed by China’s solid economic recovery, an unexpected tightening of onshore liquidity conditions has pushed them even higher and strengthened speculation that the People’s Bank of China (PBOC) may be tightening policy.

** The PBOC dismissed as “completely untrue” rumours that it had raised the interest rate on its standing loan facility (SLF).

** “The market had seen robust gains in the past months, leading to concerns over lofty valuations for some outperforming sectors like new energy and liquor makers,” said Fu Yanping, an analyst with China Galaxy Securities.

** Though Fu said investors this year could turn their eyes to cyclical firms with low valuations and solid fundamentals, citing solid economic recovery and Beijing’s pledge to maintain policy support for its economy.

** Latest data showed profits at China’s industrial firms grew for the eighth straight month in December.

** The Asian country is the only major economy in the world to avoid a contraction in 2020, with gross domestic product up 2.3% for the full year, while many countries remain crippled by the COVID-19 pandemic. (Reporting by Luoyan Liu and Andrew Galbraith; editing by Uttaresh.V)