China Stocks rebound on buybacks

The Mainland China equity market rebounded on Tuesday, 11 September 2018, as investors chased for beaten down stocks following heavy selloff in recent sessions. However, market gains were limited as most of traders remained on sideline amid lingering trade concerns. In afternoon trade, the benchmark Shanghai Composite Index bounced 0.3%, or 8.05 points, to 2,677.54, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.6%, or 8.47 points, to 1,415.39. The blue-chip CSI300 index inclined 0.36%, or 11.61 points, to 3,241.68.

Traders stayed on the sidelines amid lingering trade concerns after President Donald Trump ramped up trade tensions with China, suggesting he may impose tariffs on another $267 billion worth of Chinese goods. China's Commerce Ministry has warned it will roll out retaliatory measures if the U.S. imposes any new tariffs.

 

US President Donald Trump had warned on Friday he was ready to slap tariffs on virtually all Chinese imports into the United States, threatening duties on another $267 billion of goods on top of $200 billion in imports primed for levies in coming days. China had said on Friday it will increase export tax rebates for 397 items ranging from some steel products to electronic ones, in a bid to boost the prospects for shipments amid its trade war with the United States. China's trade surplus with the United States widened to a record in August even as the country's export growth slowed slightly, an outcome that could push President Donald Trump to turn up the heat on Beijing in their cantankerous trade dispute.

Data released over the weekend showed China's trade surplus with the US rising to a record in August, though overall export growth slowed. More economic figures released Monday showed China's consumer price index rose 2.3% in August, faster than 2.1% for July, 1.9% for June and 1.8% for both May and Apri, while producer prices rose 4.1%. The CPI growth rate is still lower than the government's 3% target, but the rising trend is causing worries. Rising inflation is always a bad sign for the market, as the government could be reluctant to announce more easing in case inflation picks up.

NEWS FROM THE PRESS: PBOC keeps liquidity at ample level -- China's central bank continued to pump cash into the money market in August to meet financial institutions' demand for liquidity. The People's Bank of China said 532 billion yuan (US$77.8 billion) was injected into the market via the medium-term lending facility last month to keep ample liquidity in the banking system. The funds will mature in one year at an interest rate of 3.3%. Total outstanding MLF loans reached 5.12 trillion yuan as of the end of August. The MLF tool was introduced in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow money from the PBOC using securities as collateral. In August, the PBOC also injected 9.1 billion yuan of funds through pledged supplementary lending to China Development Bank, The Export-Import Bank of China, and the Agricultural Development Bank of China. The PBOC has adopted open-market operations more frequently to manage liquidity.

ECONOMIC NEWS: August CPI picks up, producer inflation eases -- The Consumer Price Index, a main gauge of inflation, climbed 2.3% from a year earlier in August, faster than 2.1% for July, 1.9% for June and 1.8% for both May and April, the National Bureau of Statistics said on Monday. Last month's figure was the highest since February, when the CPI was up 2.9% year on year, driven mainly by Spring Festival holiday factors. On a month-on-month basis, the CPI increased 0.7% from July, as food prices rose 2.4% from July. The average year-on-year CPI growth for the first eight months stood at 2%, unchanged from the first seven months, according to the statistics bureau. The Producer Price Index, which measures costs for goods at the factory gate, rose 4.1% year on year in August, slowing from the 4.6% increase in July. On a monthly basis, PPI edged up 0.4% in August, picking up from 0.1% in July. For the first eight months of the year, PPI climbed 4% from the previous year.

Oil imports rise 6.5% in August-- China's crude oil imports rose 6.5% in August from a month earlier, boosted by a rebound in demand from smaller refiners, customs data showed. Arrivals last month were 38.38 million tons, or 9.04 million barrels per day (bpd), according to the General Administration of Customs. This was up from 8 million bpd a year ago and 8.48 million in July. For the first eight months of the year, crude purchases stood at 299 million tons, up 6.5%, the data showed.

CURRENCY NEWS: China's yuan weakened against the U.S. dollar on Tuesday, inline with soft mid-point fixing by People Bank of China. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8488 per dollar, weakened by 99 basis points from 6.8389 on Monday. 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. The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.

OFFSHORE MARKET NEWS: US stock market closed mixed on Monday, as traders seemed reluctant to make any significant moves amid a lack of major U.S. economic data and lingering trade concerns after President Donald Trump ramped up trade tensions with China last Friday. The Dow Jones Industrial Average fell 59.47 points or 0.2% to 25,857.07, while the Nasdaq rose 21.62 points or 0.3% to 7,924.16 and the S&P 500 inched up 5.45 points or 0.2% to 2,877.13. The major European stock markets ended higher on Monday. The U.K.'s FTSE 100 Index closed just above the unchanged line, the German DAX Index edged up by 0.2% and the French CAC 40 Index rose by 0.3%.

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