China Market extends gain on U.S.-China trade optimism

Headline shares of the Mainland China equity market inclined for second straight session on Wednesday, 12 December 2018, amid optimism about U.S.-China trade relations after Beijing's decision to cut tariffs on imported American cars from 40% to 15%, and as US President Donald trump sounded upbeat about a trade deal with China. In afternoon trade, the benchmark Shanghai Composite Index advanced 0.2%, or 5.08 points, to 2,599.16, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.06%, or 0.77 points, to 1,344.66. The blue-chip CSI300 index was up 0.16%, or 4.95 points, to 3,164.77.

The risk appetite buying underpinned after a reports that China is moving to cut import tariffs on American-made cars from 40% to 15%, and news that Huawei chief financial officer Meng Wanzhou, who faces extradition to the US, was granted bail in Canada.. That report came after Chinese Vice Premier Liu He exchanged views on the next stage of trade talks with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer. U.S. President Donald Trump said in an interview with reporters that talks were taking place with Beijing by phone and he would not raise tariffs on Chinese imports until he was sure about a deal.

 

Progress toward easing the steep tariffs China imposed on U.S. vehicle imports this year lifted carmaker stocks across the globe, as investors wagered on a thawing of tensions that have damaged the world's biggest automotive market.

The levy forms the backbone of China's response to a trade war instigated by President Donald Trump as he seeks to reset trade relations and spur manufacturing in the U.S. Car sales in China have fallen for six straight months after decades of almost uninterrupted growth, and while there are other factors, the tit-for-tat jabs between the world's biggest economies have played a role.

The tension had escalated in recent days with the arrest of Huawei Technologies Co. Chief Financial Officer Meng Wanzhou over alleged sanctions violations. A Canadian court released Meng on bail Tuesday, pending further proceedings on U.S. efforts to extradite her.

NEWS FROM THE PRESS: Car sales see steepest drop in seven years-- China automobile sales fell 13.9% in November from a year earlier, China's top auto industry association said yesterday, marking the steepest drop in nearly seven years in the world's largest auto market. The drop in sales to 2.55 million vehicles, a fifth straight decline in monthly numbers, comes against a backdrop of slowing economic growth and a Sino-U.S. trade war. It was the steepest decline since January 2012, when the timing of the lunar Chinese New Year holiday hurt auto sales. The November drop comes on the heels of almost 12% declines in each of the past two months, putting China on track for an annual sales contraction not seen since at least 1990. Sales totalled 25.4 million vehicles in the first 11 months of the year, down 1.7% from the same period a year earlier, data from the China Association of Automobile Manufacturers (CAAM) showed. The industry body did not immediately give a reason for the sales drop in November, but has cited the impact a sluggish economy and the trade war.

CURRENCY NEWS: China yuan weakened against greenback on Wednesday, after central bank lowered mid-point rate. Prior to market opening, the People Bank of China set the yuan reference rate at 6.9064, weaker than the previous fix of 6.8996. 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.

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