China Market climbs to two months peak on liquidity injection

The Mainland China equity market closed higher for sixth straight session on Monday, 09 September 2019, as risk sentiments bolstered on expectation that Beijing may introduce more monetary and consumption support measures after Chinese customs data showed the country's exports unexpectedly fell in August, pointing to further weakness in the world's second-largest economy. On Friday, the People's Bank of China cut the reserve requirement ratio (RRR) for banks by 50 basis points and 100 basis points for some banks, a move which could unleash 900 billion yuan for long-term lending. At closing bell, the benchmark Shanghai Composite Index inclined 0.84%, or 25.14 points, to 3,024.74. The Shenzhen Composite Index, which tracks stocks on China's second exchange, was up 1.91%, or 31.71 points, to 1,689.21. The blue-chip CSI300 index added 0.62%, or 24.44 points, to 3,972.95.

Investors returned to the market with positive mood on Monday, 09 September 2019, on expectations that the world's major economies would further loose monetary policies to support growth. The People's Bank of China on Friday cut the reserve requirement ratio (RRR) for banks by 50 basis points and 100 basis points for some banks, a move which could unleash 900 billion yuan of funds into the financial system to quench the thirst of highly leveraged borrowers and an economy whose growth pace is expected to slow to the worst annual pace on record.

 

Slower-than-expected U.S. payroll growth in August hinted at a slowing U.S. economy, helping cement expectations of an interest rate cut by the Federal Reserve later this month. Federal Reserve Board Chairman Jerome Powell said Friday that the central bank would continue to act "as appropriate" to sustain economic expansion in the world's biggest economy. There are also expectations that the European Central Bank would cut interest rates on Thursday.

Further, Sino-US trade tensions have eased somewhat as the two countries agreed to resume talks in October, though there were doubts if any material progress would be made this time. China and the US on Thursday, 05 September 2019, agreed to hold high-level talks in early October in Washington, cheering investors hoping for a trade war thaw as new US tariffs on Chinese consumer goods chip away at global growth. White House economic adviser Larry Kudlow said on Friday the United States wants "near term" results from trade talks in September and October but cautioned that the trade conflict could take years to resolve.

CURRENCY NEWS: China yuan eased against greenback on Monday, despite firmer mid-point fixing by central bank, as after Beijing cut the amount of cash banks must keep on reserve to bolster the economy against trade tariffs and sluggish domestic demand. Prior to market opening, the People's Bank of China set the midpoint at 7.0851 per dollar, 4 bps firmer than the previous fix of 7.0855.

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