China Market falls on trade war angst

The Mainland China equity market closed lower on Wednesday, 20 November 2019, snapping two-day winning streak, amid lingering uncertainty over the outlook for key trade talks between two major economies. Meanwhile, selloff pressure intensified amid renewed tension between the US and China over legislation supporting Hong Kong protesters. At closing bell, the benchmark Shanghai Composite Index declined 0.78%, or 22.94 points, to 2,911.05. The Shenzhen Composite Index, which tracks stocks on China's second exchange, was down 0.71%, or 11.64 points, to 1,635.16. The blue-chip CSI300 index dropped 1%, or 39.18 points, to 3,907.86.

Investors concerns that trade talks between the world's two biggest economies could hit a snag, after Beijing condemned a US Senate measure backing anti-government protesters in the Asian financial hub. In a statement, China's foreign ministry said the United States should stop interfering in Hong Kong and Chinese affairs and move to stop the latest bills on Hong Kong from becoming law. China condemned the passage of a bill by the US Senate aimed at protecting human rights in Hong Kong, amid clashes between pro-democracy protesters and police.

Conflicting signals from Washington and Beijing in the past few days deflated market hopes of a truce soon to end their damaging tariff war. President Donald Trump said the United States would raise tariffs on Chinese imports if no deal is reached with Beijing.

Shares of lenders declined amid concerns about interest margin pressure, after China's 1-year and 5-year loan prime rates (LPR) were both cut by a small 5 basis points, to 4.15% from 4.2%, and 4.8% from 4.85%, respectively. It's the third cut this year for the 1-year rate, but the first for the 5-year rate, which is often used in mortgage lending in China. China Construction Bank (601939 CH) fell 1.1% to 7.11 yuan, China Merchants Bank (600036 CH) declined 2.5% to 36.58 yuan, Industrial Bank (601166 CH) lost 3.4% to 19.16 yuan, Industrial and Commercial Bank of China (601398 CH) lost 0.9% to 5.8 yuan, and the Agricultural Bank of China (601288 CH) dropped 0.6% to 3.58 yuan. Ping An Bank (000001 CH) also fell 3.4% to 15.85 yuan.

Communication technology stocks were higher. NavInfo (002405 CH), which develops navigation software, surged to the 10% upside limit to 16.38 yuan, after it announced it will work with Huawei on its autonomous driving testing. Wonders Information (300168 CH), a smart city service provider through using internet, clouding computing and big data, also surged 10% to 17.97 yuan.

CURRENCY NEWS: China's yuan eased against greenback on Wednesday, as central bank set softer mid-point fixing and signs of tension between Beijing and Washington turned bleaker. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 7.0118 per dollar, 88 pips weaker than the previous fix of 7.003, and was the weakest since Nov. 5. The spot yuan was changing hands at 7.0304, 32 pips weaker than the previous late session close.

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