China Market ends firmer

The Mainland China equity market closed firmer on Friday, 27 September 2019, on rising optimism about a US-China trade deal after China's commerce ministry said Beijing and Washington are still discussing details of upcoming trade talks in October, and making preparations to ensure "positive progress" is made during the negotiations. However, market gains were limited after latest official data showed China's industrial profits decreased 2% year-on-year in August. At closing bell, the benchmark Shanghai Composite Index advanced 0.1%, or 3.08 points, to 2,932.17. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.91%, or 14.54 points, to 1,612.26. The blue-chip CSI300 index grew 0.3%, or 11.51 points, to 3,852.65. For the week, Shanghai Composite Index lost 2.5%.

Traders were encouraged by a Chinese Commerce Ministry announcement that importers had agreed to buy U.S. soybeans as the two sides make conciliatory gestures ahead of trade talks. China's commerce ministry said Beijing and Washington are still discussing details of upcoming trade talks in October, and making preparations to ensure "positive progress" is made during the negotiations, stoking hopes that the two sides would find a way out of their near 15-month old trade war.

The atmosphere around the trade spat also turned lighter after US President Donald Trump on Wednesday told reporters the two sides were having "good conversations" and that an agreement "could happen sooner than you think." Since China is Australia's largest trading partner, domestic stocks are particularly sensitive to developments on the Sino-US trade front.

Plans to go ahead with negotiations next month have helped to ease market jitters, but there has been no sign of progress toward resolving the bruising tariff war over trade and technology.

Shares of steel companies lost out after the Ministry of Industry and Information Technology said China - the world's top steelmaker - was still having trouble containing increasing steel capacity - most of which was illegal. Maanshan Iron & Steel lost 0.34%, Baoshan Iron & Steel dropped 1.82%, Angang Steel fell 0.72%

Shares in the virtual reality, China-made software and consumer electronics sectors advanced, with shares of Jiangxi Lianchuang Opto-electronic Science & technology surging by the daily 10% limit.

Bucking the trend, shares in the medical equipment sector were among the biggest losers. Guangzhou Boji Medical & Biotechnological Co saw its shares drop by 10% to 19.17 yuan per share.

ECONOMIC NEWS: China Industrial Profits Decline 2% On Year In August-- China's industrial profits decreased 2% year-on-year to 517.8 billion yuan (US$72.59 billion) in August, in contrast to July's 2.6% as trade disputes with the United States weighed on the corporate sector, data from the National Bureau of Statistics showed Friday. During January to August period, industrial profits declined 1.7% annually, the same rate of fall as seen in first seven months of 2019. In the first eight months of the year, profits of state-owned companies declined 8.6%. Meanwhile, profits of private firms advanced 6.5%. Profits of the mining industry grew 2.1%, while manufacturing industries' profits decreased 3.2%.

China's central bank drains 10 bln yuan from market-- China's central bank drained 10 billion yuan (about 1.41 billion U.S. dollars) from the financial system on Friday, with more reverse repos maturing than conducted. The People's Bank of China injected a total of 30 billion yuan into the market through 14-day reverse repos at the interest rate of 2.7%. With 40 billion yuan worth of reverse repos maturing on the same day, this led to a net liquidity withdrawal of 10 billion yuan.

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