China Market extends gains on foreign inflows

Headline indices of the Mainland China equity market closed higher for second straight session on Tuesday, 28 May 2019, as a top regulatory official downplayed the impact of the trade war with the United States. Meanwhile, risk sentiments boosted by inflows of overseas capital before the first step of MSCI's inclusion of Chinese A-shares took effect. At closing bell, the benchmark Shanghai Composite Index was up 0.61%, or 17.53 points, to 2,909.91. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.53%, or 8.13 points, to 1,541.65. The blue-chip CSI300 index rose 0.96%, or 35.06 points, to 3,672.26.

The trade war with the United States has had limited impact on China's financial markets and its effects will be "even smaller" in the future, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said on Monday.

 

If Sino-US trade tensions deteriorate further, there is a possibility of marginal easing in China's fiscal and monetary policies, as Beijing could take counter-cyclical measures to fully hedge the negative impact and stabilise market expectations, China Galaxy Securities said in report.

Besides, Beijing is further opening up its financial markets despite the trade war, which market participants expect could bring in more long-term foreign money to prop up its stock market.

The trade war between the US and China, the world's two largest economies, has stretched to the technology sector, after US President Donald Trump signed an executive order barring the use of telecommunications equipment made by companies deemed a threat to America's national security. Huawei Technologies, the world's largest maker of 5G telecoms equipment, has been banned. Last week, Wu Qing, a vice mayor of Shanghai, said the city would grant financial and tax incentives to buoy domestic players in the fields of AI, biotechnology and semiconductors because western companies led in these core technologies.

Overseas investors poured into A-shares, with the net capital inflow via the Stock Connect linking Hong Kong and the Chinese mainland once hitting 11 billion yuan during the day and reaching nearly 7.5 billion yuan at the close. The first phase of MSCI's increase of Chinese A-shares weighting into its global indexes officially went into effect after the bell on Tuesday.

Shares of agricultural companies closed stronger, with stocks of five A-share companies including Gansu Dunhuang Seed Co and Fujian Aonong Biological Technology Group Inc surging by the daily limit of 10%.

Stocks related to venture capital were also among the biggest gainers. Suzhou New District Hi-Tech Industrial Co and Shanghai DaZhong Public Utilities Group Co both hit the 10% daily cap.

Media industry registered robust performance as well. Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd. gained 1.86% to 10.41 yuan a share.

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