China Market gains on US trade deal hopes

The Mainland China equity market closed higher on Thursday, 10 October 2019, as risk sentiment was lifted by hopes of progress in the US-China trade war as well as on reports that the US will soon give some US companies licenses to supply non-sensitive goods to China telecom giant Huawei, which was put on a US trade blacklist, but a report stating Chinese officials are looking to cut short their visit to the US capped gains. At closing bell, the benchmark Shanghai Composite Index rose 0.78%, or 22.85 points, to 2,947.71. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 1.41%, or 22.74 points, to 1,631.84. The blue-chip CSI300 index climbed 0.82%, or 31.40 points, to 3,874.64.

Investor sentiment got a boost after reports that China remained open to agreeing to a partial trade deal with the United States and offering to increase its annual purchases of US agricultural products.

The White House is weighing a currency pact with China as part of a partial deal that could see a planned tariff hike next week being suspended and part of what it regards as a first-phase agreement with Beijing. US President Donald Trump said on Wednesday there was a very good chance that the United States and China will reach a trade agreement, but added that "in my opinion China wants to make a deal more than I do".

The United States will soon issue licences for some of its firms to supply non-sensitive goods to banned Chinese telecoms firm Huawei Technologies Co Ltd, the New York Times said on Wednesday.

Market participants remained focused on the resumption of trade talks in Washington D.C. between the U.S. and China with import tariffs set for $250 billion worth of Chinese goods at a rate of 30% from 25% on 15 October 2019. A 15% tariff on an additional $160 billion worth of Chinese imports is also expected to kick in on 15 December 2019. Top-level officials from the world's two largest economies are set to meet in Washington on Thursday and Friday after deputy-level talks earlier this week. The world's two largest economies have imposed tariffs on billions of dollars' worth of one another's goods since the start of 2018, battering financial markets and souring business and consumer sentiment.

Fifteen stocks hit or nearly hit the 10% daily limit, including Xinjiang Youhao (600778 CH), which owns department stores and others and is up 21% for the year, and Anhui Wanwe Updated High-Tech Material Industry (600063 CH), which makes chemical products and has risen 55% this year.

CURRENCY NEWS: The People's Bank of China (PBOC) set the midpoint rate at 7.0730 per dollar on Thursday, 2 bps weaker than the previous fix of 7.0728. Spot yuan opened at 7.1209 per dollar and climbed to a high of 7.1 at one point, the strongest since Sept. 20. As of midday, the onshore spot yuan was changing hands at 7.1142, 173 bps firmer than the previous late session close.

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