China Market ends in the red

The Mainland China equity market closed down on Thursday, 29 August 2019, as worries of a global recession from an intensifying U.S.-China trade war and the rising possibility of a no-deal Brexit continued to beat down risk sentiment. Weakness in the renminbi also weighed on the market. However, market losses were capped after China signaled trade talks with the US could be back on, fueling hopes for a deal that end the year-long trade war between the world's two largest economies. At closing bell, the benchmark Shanghai Composite Index declined 0.1%, or 2.82 points, to 2,890.92. The Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 0.17%, or 2.74 points, to 1,591.08. The blue-chip CSI300 index dropped 0.33%, or 12.39 points, to 3,790.19.

In a dramatic move on Wednesday, Britain's new Prime Minister Boris Johnson set in motion the suspension of the UK Parliament - which means MPs have much less time to debate Brexit, the process of the UK leaving the European Union. Parliament is to be suspended for five weeks ahead of 31 October, the day the UK is due to leave the EU.

 

The UK was originally scheduled to leave the EU on 29 March. After Parliament rejected the deal negotiated with the EU three times, that deadline was extended. Departure day is now 31 October. Mr Johnson, who was one of the key figures in the Leave campaign, has promised to complete Brexit "do or die" - with or without a deal. However, most opposition members of Parliament (MPs) and many from the governing Conservative Party don't want to leave the EU without a deal. They fear it would damage the British economy, putting up prices and limiting access to the UK's biggest market.

Investors were cautiously awaiting for clarity on when the next steps in the U.S. and China trade negotiations might happen after President Donald Trump's recent pronouncements on trade. Treasury Secretary Steven Mnuchin said U.S. trade officials expect Chinese negotiators to visit Washington, but wouldn't say whether a previously planned September meeting would take place, while White House trade adviser Peter Navarro played down a quick resolution..

Shares of financials and utilities were notable losers. Banking stocks softened following a report that China is considering new rules for the country's small-to-medium financial institutions to reduce risk in the wider economy. Ping An Insurance (601318 CH) lost 0.2%, to 86.7 yuan. China Merchants Bank (600036 CH) fell 1.7% to 33.93 yuan. China Life Insurance (601628 CH) fell 1.3% to 28.64 yuan. China Yingtze Power (600900 CH) lost 1.4% to 18.78 yuan. China Shenhua Energy (601088) ended down 1.5% at 18.55 yuan.

Shares of software sector inclined, thanks to weakening of yuan against greenback. China National Software & Service (600536 CH) hit the daily 10% up limit, at 68.68 yuan, a historic high. Others hitting the 10% upside limit included Beijing VRV Software (300352 CH), ending at 5.96 yuan, and Hunan Copote Science Tech (600476 CH), which finished at 17.62 yuan.

CURRENCY NEWS: China yuan weakened against greenback on Wednesday, after softer mid-point fixing by central bank. Prior to market opening, the PBOC lowered its official yuan midpoint to 7.0858 per dollar, 0.03% weaker than the previous fix of 7.0835, fresh 11-1/2-year low. The onshore spot yuan was changing hands at 7.1668, weaker by 23 bps than the previous late session close and 1.14 percent softer than the midpoint.

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