China stocks climb; set for yearly gains on economic recovery, policy support

* SSEC +0.8%, CSI300 +0.9%, HSI +0.4%

* HK->Shanghai Connect daily quota used 2.6%, Shanghai->HK daily quota used 5.8%

* FTSE China A50 +0.9%

SHANGHAI, Dec 31 (Reuters) - China stocks climbed on the last trading day of 2020, as investors cheered a Sino-Europe investment deal and Beijing’s continued policy support for its capital markets.

The CSI300 index rose 0.9%, to 5,161.89 points, at the end of the morning session on Thursday, while the Shanghai Composite Index gained 0.8%, to 3,442.79 points.

Major indexes were on track for yearly gains, with Shenzhen’s start-up board poised for its best year since 2015, thanks to a continued economic recovery and policy support.

The European Union and China agreed on Wednesday to an investment deal that will give European companies greater access to Chinese markets and help redress what Europe sees as unbalanced economic ties.

“The deal exceeds market expectations and has a profound impact,” said Yan Kaiwen, an analyst with China Fortune Securities.

Yan said European countries needed to cooperate more with China, which is the world’s second-largest economy, amid the coronavirus outbreak.

Also helping boost sentiment, China said on Wednesday it planned to increase the proportion of the country’s annuity funds that can be used to invest in equities, which could inject 300 billion yuan ($45.95 billion) into capital markets.

For the month, CSI300 rose 4.1%, while SSEC firmed 1.5%.

For the year, CSI300 gained 26% and SSEC added 13%, while the start-up board ChiNext spiked 63%, on track for its biggest yearly gain since 2015.

“The strength in the start-up board reflects a change in China’s economic structure，as the country is shifting to high-quality development,” said Niu Chunbao, chairman at Wanji Asset, a Shanghai-based private securities fund.

Analysts and traders said the solid gains in the A-share market also found support in a continued recovery in China’s economy.

The country’s economy is expected to expand around 2% for the full year - the weakest pace in over three decades but much stronger than other major economies still struggling to contain infections.

In Hong Kong, the Hang Seng index added 0.3%, to 27,231.13 points, while the Hong Kong China Enterprises Index gained 0.7%, to 10,738.40 points.

For the year, HSI and HSCE lost 3.4% and 3.8%, respectively. ($1 = 6.5290 Chinese yuan)