China Market surges 2.4%

Headline indices of the Mainland China equity market closed near 13-month high on Tuesday, 16 April 2019, as risk appetite buying underpinned partly on brisk home prices data and as the People's Bank of China resumed open market operations to inject liquidity into the money market after suspension for 18 consecutive trading days. At closing bell, the benchmark Shanghai Composite Index surged 2.4%, or 75.81 points, to 3,253.60 The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 2.1%, or 36.11 points, to 1,760.02. The blue-chip CSI300 index grew 2.77%, or 110.27 points, to 4,085.79.

The People's Bank of China (PBOC) conducted 40 billion yuan (about 5.96 billion US dollars) of seven-day reverse repos at an interest rate of 2.55%. No reverse repos will mature on Tuesday. A reverse repo is a process by which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.

 

China's central bank said Monday that it would strengthen coordination between monetary, fiscal and other policies to keep growth stable and forestall risks. The People's Bank of China will continue its counter-cyclical adjustments while making monetary policy forward-looking and fine-tuned, it said in a statement issued after a quarterly meeting of the monetary policy committee. Monetary policy should be "neither too loose nor too tight," while liquidity will be kept at a reasonable and ample level, it said. The central bank will not adopt strong stimulus policies, it said. The growth pace of M2, a broad measure of money supply that covers cash in circulation and all deposits, as well as that of social financing scale, should be commensurate with the growth in nominal GDP. It will continue to deepen reform of the financial system and improve the "two-pillar" policy framework, which includes monetary policy and macro-prudential policy. The central bank will steadily push reforms in key areas such as the interest rate and further improve the transmission mechanism of monetary policies, the statement said. It will optimize financing and credit structure to better serve the private sector and the real economy. The meeting also called for further financial opening-up and increased management and risk-control capabilities. The central bank also said it would use a variety of monetary policy tools to keep the yuan stable at "a reasonable and balanced level."

The Sino-U.S. trade talks continue be a market focus market. The two sides will carry on negotiations via phone this week, U.S. Treasury Secretary Steven Mnuchin said on Saturday. The official said he is hopeful the two countries are getting close to the final round of concluding issues.

Property stocks advanced, as the latest data showed home prices picking up among smaller outlying cities, with property buyers returning in droves. Prices of new homes rose in 65 of the 70 cities, a big jump from 57 in February, and the pickup in prices was most apparent in the smaller, far-flung cities away from the major urban centre. Beijing Capital Development (600376) gained 2.3% to 10.10 yuan. Guangzhou Yuetai Group (600393) advanced by as much as 5.9% to 3.60 yuan. Poly Development and Holdings Group (600048), one of the country's largest home builders, gained 1.5% to 14.05 yuan.

CURRENCY NEWS: China's yuan eased against the U.S. dollar on tuesday, despite firmer mid-point fixing by central bank. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7097 per dollar, 15 basis points stronger than the previous fix of 6.7112. In the spot market, Spot yuan traded at 6.7098 per dollar at afternoon, 13 bps weaker than the previous late session close.

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