China Market extends losses ahead of Sino-US trade talks, key economic data

Headline indices of the Mainland China equity market declined on Monday, 29 April 2019, following 5.6% slump last week, as investors continued selling amid a lacklustre earnings season and fresh domestic economic data due this week. Meanwhile, caution ahead of Sino-U.S. trade negotiations also weighed on sentiments. Around late afternoon, the benchmark Shanghai Composite Index dropped 0.74%, or 22.76 points, to 3,063.64. The Shenzhen Composite Index, which tracks stocks on China's second exchange, sank 2.24%, or 37.35 points, to 1,628.45. The blue-chip CSI300 index shed 0.28%, or 10.90 points, to 3,900.17. Mainland markets will be shut from Wednesday for a three-day break.

Big Chinese banks including Bank of China, Bank of Communications, China Construction Bank, Industrial and Commercial Bank of China, and China Merchants Bank will report. Carmakers Great Wall Motor and Guangzhou Auto are due today, as well as big state-owned enterprises such as network operator China Telecom and oil giants Sinopec and PetroChina. Brokerages and insurers scheduled today include Ping An Insurance, Everbright Securities, Orient Securities, Huatai Securities, and Founder Securities.

On the U.S.-China trade front, Treasury Secretary Steven Mnuchin said in an interview that negotiations between the two economic powerhouses were "into the final laps," according to reports. Eyes now turn to Beijing where top US negotiators will return for another round of trade talks with their Chinese counterparts, with the White House saying issues to be covered include intellectual property, forced technology transfer, agriculture and enforcement. While the general consensus is for the two to eventually reach a deal to end their long-running trade war there are still a number of sticking points, and Mr Trump has warned he is willing to walk away from talks of he is not happy with their progress.

Apart from the trade talks, investors also await April manufacturing data release on Tuesday. Chinese financial markets will be closed from Wednesday for Labor Day holiday, and trading will resume on Monday, May 6.

Shares of liquor companies advanced, driven by bright first-quarter earnings. High-end baijiu products are likely to see their prices continue increasing because of tight supply, while company selling slightly less pricey ones will also be able to raise profit margin because of strong demand, according to reports. A gauge tracking 17 Chinese liquor makers listed in Shanghai and Shenzhen jumped 8% today, after industry leaders including Wuliangye Yibin (000858 SZ) and Luzhou Laojiao (000568 SZ) posted higher-than-expected results. Luzhou Laojiao rose as much as 6%.

Eastern Communications (600776 SH), a provider of wireless equipment and corporate communication services, plummeted by the daily limit of 10% after reporting a 31% decline in first-quarter net profit. The company has been branded a monster stock by Chinese investors because of the strong speculation in its stock price based on the 5G concept, even though it declared it was not involved in the business of 5G at all. The stock has more than quadrupled in price since December.

CURRENCY NEWS: China's yuan eased against the U.S. dollar on Monday, despite soft mid-point fixing by central bank amid month-end corporate demand for the dollar, and the release of April economic indicators. Prior to market opening on Monday, the People's Bank of China (PBOC) set the midpoint rate at 6.7310 per dollar, 3 bps weaker than the previous fix of 6.7307. In the spot market, the onshore yuan opened at 6.7345 per dollar and was changing hands at 6.7322 at afternoon, 22 bps weaker than the previous late session close and 0.02% softer than the midpoint.

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