China Market rebounds 1.1% from two-and-half-year low

The Mainland China equity market started the week on a positive footing on Monday, 20 August 2018, as investors chased for bargain hunting across the board after benchmark indices slipping below its lowest closing level of 2016. Meanwhile, buying momentum was spirited by tracking positive finish on Wall Street last Friday and other Asian markets on optimism about U.S.-China trade talks. At closing bell, the benchmark Shanghai Composite Index inclined 1.11%, or 29.50 points, to 2,698.47, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.6%, or 8.69 points, to 1,451.07. The blue-chip CSI300 index added 1.17%, or 37.63 points, to 3,267.25.

Market participants are awaiting developments in the US-China trade conflict after the two countries said on Thursday, 16 August 2018, that they would hold lower-level trade talks next week. As per reports, the talks in Washington would take place on August 21 and 22, just before $16 billion in new US tariffs on Chinese goods take effect, along with an equal amount of retaliatory tariffs from Beijing. The US Trade Representative's office said on Friday it doubled the length of tariff hearings on the next $200 billion worth of Chinese goods to six days from the previously planned three due to overwhelming demand from companies to testify. The hearings will be held Aug. 20-24 and on Aug. 27.

Around $1.5 trillion has been wiped from the Shanghai Composite Index since it hit a more than two-year high in January. Investors have been spooked by factors ranging from Beijing's deleveraging campaign and its impact on liquidity, to a heated trade dispute with the U.S., a weakening yuan and signs of a slowing economy.

NEWS FROM THE PRESS: Robot industry grows by nearly 30% -- CHINA'S robot industry has been growing at a pace of nearly 30% annually for the past five years, said Miao Wei, minister of China's Ministry of Industry and Information Technology at the World Robot Conference 2018, held in Beijing on Aug. 15, according to Chinanews.com. China's robot industry saw revenue of almost US$7 billion in 2017, with an industrial robot output of over 130,000 units, said Miao, adding that the country has witnessed encouraging progress in aspects including core technology research and development, construction of industrial chain and application field expansion. According to the International Federation of Robotics (IFR), the global robot industry exceeded US$25 billion in revenue last year and is expected to reach US$30 billion in 2018.

Finance firms asked to boost infrastructure support -- THE banking and insurance regulator has asked the nation's banks and insurance companies to give more support to infrastructure investment, importers and exporters, and creditworthy companies experiencing temporary problems. In a statement posted on its website late Saturday, the China Banking and Insurance Regulatory Commission said that credit support should be boosted for infrastructure projects that have sound operations and an adequate capital base on condition local governments' implicit debts don't increase. The regulator also called on the institutions to raise the proportion of medium and long-term loans to avoid placing strain on borrowers at the end of the month or quarter. The move came amid a period of uncertainty for China's economy, in part because of an intensifying trade row with the United States. The government is accelerating infrastructure spending and rolling out other support measures for businesses to cushion the economy as it braces for the impact of escalating U.S. trade tariffs. On Saturday, the regulator called on banks and insurers to address weak points in China's infrastructure sector and cooperate with local governments to identify their needs but be careful about raising their hidden debt levels. It also said financial institutions should not blindly withdraw funding from companies that have a good credit record but that are experiencing temporary operational difficulties, without naming any such firms.

CURRENCY NEWS: China's yuan firmed against the dollar on Monday, inline with firm mid-point fixing by central bank. The People's Bank of China (PBOC) strengthened 176 basis points to 6.8718 against the U.S. dollar Monday. In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2% from the central parity rate each trading day.

OFFSHORE MARKET NEWS, US stock market closed higher on Friday, after reports that Chinese and U.S. negotiators are drawing up a road map for talks to try to end their trade impasse. The Dow Jones Industrial Average advanced 110.59 points or 0.4% to 25,669.32, the Nasdaq inched up 9.81 points or 0.1% to 7,816.33 and the S&P 500 rose 9.44 points or 0.3% to 2,850.13.

The major European markets also closed mixed on Friday. The U.K.'s FTSE 100 Index inched up by less than a tenth of a percent, the French CAC 40 Index and the German DAX Index edged down by 0.1% and 0.2%, respectively.

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