China Market extends gain on trade deal hopes

The Mainland China equity market advanced for second day in a row on Tuesday, 26 November 2019, due to optimism that the two sides will soon agree an interim deal to halt their trade war. The market also found help in robust foreign inflows ahead of the taking effective of MSCI's further A-share. Around late afternoon, the benchmark Shanghai Composite Index inclined 0.1%, or 2.58 points, to 2,908.75. The Shenzhen Composite Index, which tracks stocks on China's second exchange, was up 0.14%, or 2.32 points, to 1,602.77. The blue-chip CSI300 index added 0.17%, or 6.60 points, to 3,884.81.

Investors were encouraged by positive comments from US President Donald Trump, Chinese President Xi Jinping and Chinese state-owned media about the chance for an imminent trade deal. A Chinese state-backed tabloid said Beijing and Washington were very close to an initial pact. Also, Chinese Vice Premier Liu He, U.S. Trade representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin discussed issues related to a "phase one" trade agreement and agreed to maintain communication on remaining issues. The report came on the heels of comments over the weekend by a top U.S. official that an agreement was still possible by the end of the year, dampening worries the negotiations could spill over into 2020.

 

The United States has imposed tariffs on Chinese goods in a 16-month long dispute over trade practices that the US government says are unfair. China has responded in kind with its own tariffs on US goods. If both sides cannot reach an agreement soon, the next important date to watch is Dec. 15, when Washington is scheduled to impose even more tariffs on Chinese goods.

The inclusion factor of mainland listed companies in MSCI's indices will rise from 15 per cent to 20 per cent after the market close on Tuesday. MSCI has increased the inclusion factor of A shares by 5 percentage points each time in May, August and November, and has quadrupled it since they were added to the benchmarks in June 2018. MSCI will add 189 mainland-traded mid-cap stocks including some from the start-up board ChiNext in its benchmarks.

Fund managers expect fresh inflows of nearly US$7 billion into Chinese equities from global investors after index complier MSCI lifts the weighting of A shares in its benchmark gauges for the third time this year. BlackRock, the world's largest asset manager with US$6.84 trillion in assets under management, predicts that the upcoming adjustment by MSCI will help A shares draw passive fund inflows of US$6.7 billion. China International Capital Corp, one of the mainland's leading investment banks, is more upbeat, expecting overall capital inflow of up to US$40 billion from both passive and active funds.

CURRENCY NEWS: China's yuan firmed against greenback on Tuesday, as central bank set firmer mid-point fixing and as the US is seen rolling back tariffs imposed on the world's second-largest economy. The yuan also rose to 7.240 to the dollar CNY=CFXS, about 0.15% higher than the previous close.

Powered by Capital Market - Live News