China Market falls ahead of Trump and Xi meeting at G20

The Mainland China equity market closed down on Tuesday, 25 June 2019, snapping a six-day streak of gains, as investors locked in profits on caution ahead of an expected meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the upcoming G-20 summit in Japan. Market sentiment was also impacted by reports the United States could cut off one of China's largest banks from the U.S. financial system. At closing bell, the benchmark Shanghai Composite Index fell 0.87%, or 26.07 points, to 2,982.07. The Shenzhen Composite Index, which tracks stocks on China's second exchange, declined 1%, or 15.63 points, to 1,560.46. The blue-chip CSI300 index dropped 1.04%, or 39.96 points, to 3,801.31.

The main event this week (Fri-Sat) is the G20 meeting in Japan and in particular the potential meeting between Presidents Donald Trump and Xi Jinping on the sidelines. The two leaders are expected to discuss the protracted trade fight between their two countries. China and the U.S. have already slapped tariffs on billions of dollars worth of each other's goods over the past year. In May, the two economic powerhouses hiked tariffs targeting some goods. The Trump administration has said previously that Trump is ready to raise tariffs on all Chinese imports into the U.S. if the two countries fail to arrive at a deal.

Chinese Vice Premier Liu He conversed with U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin on Monday ahead of talks between Xi and Trump later this week.

China's Ministry of Commerce said in a statement on Tuesday that the country's Vice Premier Liu He had a phone call with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer on Monday. They discussed trade and agreed to maintain communications, according to the statement.

Meanwhile, the U.S. on Monday imposed sanctions on Iran over the latter's shooting down of an unmanned American drone last week. Tensions between the two countries have remained high since a recent attack on oil tankers near the Strait of Hormuz.

Shares of banking sector declined after reports that US investigators are probing three Chinese banks for their potential involvement in knowingly helping finance North Korea's nuclear-proliferation network. One of the banks mentioned, China Merchant Bank (600036 CH) dropped 4.82% to 36.13 yuan. Another bank, Shanghai Pudong Development bank (600000 CH) dropped 3.1% at 11.66 yuan and Bank of Communications (601328 CH) dropped 3% at 6.1 yuan. The spillover affected also Industrial and Commercial Bank of China (601398 CH), down 0.9% at 5.83 yuan, and Ping An Insurance (601318 CH), down 1.8% at 86.63 yuan.

Shares related with the rare earth sector was down on profit booking, with Chengdu Galaxy Magnets (300127 CH) down close to 10%, at 20.64 yuan; BGRIMM Technology (600980 CH) down 8.06% at 18.48 yuan; and Rising Nonferrous Metals (600259 CH) down 6.83% at 39.99 yuan. China Northern Rare Earth (600111 CH) was down 4%, at 12.67 yuan. JL Mag Rare-Earth (300748 CH) fell 7.21% at 65.01 yuan.

CURRENCY NEWS: China yuan eased against greenback on Tuesday, after the central bank set a weaker official midpoint, and uncertainty over Sino-U.S. trade negotiations. Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8580 per dollar, 77 pips or 0.1% weaker than the previous fix of 6.8503. In the spot market, the onshore spot yuan opened at 6.8710 per dollar and was changing hands at 6.8807 at afternoon, 46 pips softer than the previous late session close.

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