China Market extends gain on stimulus hopes

The Mainland China equity market closed higher after volatile trade on Tuesday, 03 September 2019, as bottom fishing continued on speculation that Beijing would unveil more stimulus measures to keep growth target of around 6.0-6.5% this year and to prevent sharp market selloffs ahead of the 70th anniversary of the founding of the People's Republic of China on 1 October 2019. The Shanghai Composite industry groups were mostly higher, with shares in the aviation, technology development, media and communications sectors being notable gainers on Beijing's continued push for self-sufficiency in the sector amid bruising trade war with the United States, while healthcare firms lagged as Beijing expanded a drug bulk-buy programme.

At closing bell, the benchmark Shanghai Composite Index inclined 0.21%, or 6.05 points, to 2,930.15. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.66%, or 10.64 points, to 1,625.56. The blue-chip CSI300 index added 0.14%, or 5.29 points, to 3,853.61.

 

The uncertainty about the US-China trade continues to rule the markets. Markets remain sensitive to the twists and turns on trade with the chances of a resolution between the world's two-biggest economies appearing more out of reach. Damage from the uncertainty is now being reflected in economic data: a slide in China's official purchasing managers' index highlighted pressures facing the world's second-largest economy from escalating tensions. Violent confrontations in Hong Kong are also weighing on sentiment.

China on Monday lodged a complaint against the United States at the World Trade Organization, after Washington slapped a 15% tariffs on various Chinese goods the previous day. Beijing hit back with new duties on U.S. crude oil.

There's also expectation that Beijing would be ready to intervene to prevent sharp market selloffs ahead of the 70th anniversary of the founding of the People's Republic of China on 1 October 2019 and then to the Party's Fourth Plenum scheduled also for October.

ECONOMIC NEWS: China's Caixin factory Purchasing Managers' Index rose to 50.4 in August from 49.9 in July, largely driven by the fastest growth in production in five months, survey data from IHS Markit showed Monday. A score above 50 indicates expansion. The official manufacturing PMI dropped to 49.5 in August from 49.7 in July. Meanwhile, the non-manufacturing PMI improved to 53.8 from 53.7, data released over the weekend showed.

CURRENCY NEWS: China yuan weakened further against greenback on Tuesday, despite virtually flat mid-point fixing by central bank. Prior to market opening, the People's Bank of China set the midpoint at 7.0884 per dollar, the weakest since March 2008, and 1 bps weaker than the previous fix. Escalations in the year-long trade conflict led the Chinese currency to its sharpest monthly drop in 25 years in August. The onshore yuan changed hands at 7.1806 at midday, 89 bps weaker than the late session close and 1.3 percent softer than the midpoint.

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