China Market ends down

Headline shares of the Mainland China equity market closed lower on Thursday, 27 December 2018, after erasing early gains late afternoon, dragged down by Sinopec which fell after reports that the state-owned oil giant had suspended two top executives at its trading arm. The sudden suspensions erased the optimism in the morning session, when expectations of policy support and buoyant global stock markets led local stocks higher. Local market gained in early trade on tracking Wall Street's overnight surge, where all three main benchmarks advanced at least 5% after strong retail sales data and White House reassurances that Fed Chair Jay Powell won't be fired and as reports stated Financial Stability and Development Committee under the State Council are studying plans to help banks replenish capital as they look to continue with their crackdown on financial risk without hurting credit growth. At closing bell, the benchmark Shanghai Composite Index dropped 0.61%, or 15.21 points, to 2,483.09, marking lowest close since November 2014. The Shenzhen Composite Index, which tracks stocks on China's second exchange, declined 1.22%, or 15.56 points, to 1,264.23. The blue-chip CSI300 index was down 0.38%, or 11.52 points, to 2,990.51.

The Dow surged more than 1,000 points for the first time overnight, leading a broad Wall Street rebound after a report of robust holiday sales helped mollify concerns about the health of the US economy. Sales in the 2018 US holiday shopping season rose 5.1 per cent to more than $US850 billion, the strongest in six years, according to a Mastercard report. The S&P 500 retailing index jumped 7.4 per cent, while shares of online retailer Amazon, which touted a "record-breaking" season, climbed 9.5 per cent. Also helping sentiment somewhat was White House economic adviser Kevin Hassett responded to a question about whether Jerome Powell's job as chairman of the Federal Reserve was safe: "Yes, of course, 100 per cent."

The Financial Stability and Development Committee under the State Council said it is seeking to help commercial banks replenish capital via various channels, with the aim of allowing them to issue perpetual bonds as soon as possible. The committee met Tuesday to study the plans to allow banks to sell perpetual bonds. Many Chinese banks need to replenish capital to meet increasingly stringent capital rules as they face growing pressure to write off bad loans and heed government calls to aid the economy amid a Sino-U.S. trade war. A perpetual bond is a fixed income security with no maturity date, and the principal will not be repaid. The move to promote sales of perpetual bonds as soon as possible came as new regulations on asset management force banks to absorb off-balance-sheet debts. Swelling soured loans and a slump in share prices are making it harder for banks to raise money. Stronger capital buffers also put the banks in a position to increase lending to private companies and help meet the government's promise to support the sector.

Sinopec, officially known as China Petroleum & Chemical Corp, , Reuters reported on Thursday. Shares of Sinopec, officially known as China Petroleum & Chemical Corp, dropped 6.8% after the news that the Asia's largest refiner suspended two top officials for inflicting severe losses in trading.

NEWS FROM THE PRESS: 1) The country's top economic planner said late Tuesday it has approved a high-speed railway project in the northwestern province of Shaanxi with a total investment of 55.16 billion yuan (US$8.01 billion). China has increased infrastructure spending in recent quarters to spur slowing growth in the world's second-biggest economy.

2) CHINA'S soybean imports from the United States plunged to zero in November, marking the first time since the trade war started that China, the world's largest soybean buyer, has imported no U.S. supplies. China brought 5.07 million tons of soybeans from Brazil in November, up more than 80 percent from 2.76 million tons a year ago, data from the General Administration of Customs showed. Meanwhile, U.S. imports plunged from 4.7 million tons in November 2017 and were down from 67,000 tons in October. The United States was the second-largest supplier of soybeans to China and the trade was worth US$12 billion in 2017.

CURRENCY NEWS: China yuan weakened against greenback on Thursday, as central bank set softer mid-point rate. Prior to market opening, the People's Bank of China set the midpoint rate at 6.8894, softer by 49 basis points from previous day's central parity rate of 6.8845.

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