China Market climbs after regulator encourages share buybacks

The Mainland China equity market were higher on Tuesday, 30 October 2018, as investors bought back issues oversold recently, with sentiment bolstered as the country's securities regulator said it will encourage share buybacks and mergers & acquisitions by listed firms. The China Securities Regulatory Commission (CSRC) also said it will enhance market liquidity, reduce unnecessary interference in trading, and create a level playing ground for investors. It added it would guide more long-term capital into the markets. However, market gains were modest amid fresh worries over Sino-U.S. trade frictions after reports the U.S. is planning an additional $257 billion worth of tariffs on Chinese goods if upcoming talks between Presidents Donald Trump and Xi Jinping fail to end the trade war. In afternoon trades, the benchmark Shanghai Composite Index added 0.7%, or 18.28 points, to 2,560.38, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.25%, or 3.16 points, to 1,267.74. The blue-chip CSI300 index grew 1%, or 29.65 points, to 3,106.53.

The Shanghai Composite declined more than 22% in CY2018, battered by the trade dispute with the U.S., signs of a slowing economy and a weaker yuan. That's prompted the government to announce measures to restore confidence, promising support for the private sector and easing share-pledging risks.

The National People's Congress said Friday that companies can now repurchase shares with approval from at least two-thirds of the board if deemed necessary to protect shareholders' interests, or to fund convertible bond exchanges, after a faster-than-usual revision to existing law. Firms were previously only allowed to buy back shares for more limited purposes including stock incentives, and had to get shareholder approval. China will encourage buybacks by listed companies, the nation's securities regulator said Tuesday. At least 41 listed companies on Sunday announced new share buyback proposals, changes to existing plans or progress on previous plans, the Securities Times said on Monday, citing its own calculations. The total amount to be spent is as much as 16.8 billion yuan, the report said.

CURRENCY NEWS: China's yuan depreciated against the U.S. dollar on Tuesday, after soft mid-point fixing by central bank and on signs that a trade war with the U.S. may escalate. Prior to market open, the People's Bank of China set the midpoint rate at 6.9711 per dollar, the highest level since May 2008

OFFSHORE MARKET: US stock market closed lower on Monday, amid worries about renewed trade tensions between the U.S. and China as well as on lower crude oil prices. Investors are concerned that corporate earnings may peak this quarter as borrowing costs rise with the US Federal Reserve expected to raise interest rates by 25 basis points in December, followed by another two possible hikes in 2019. The Dow Jones Industrial Average slumped 245.39 points or 1% to 24,442.92, the Nasdaq tumbled 116.92 points or 1.6% to 7,050.29 and the S&P 500 fell 17.44 points or 0.7% to 2,641.25.

European markets ended higher on Monday. The French CAC 40 Index rose by 0.4%, the German DAX Index and the U.K.'s FTSE 100 Index jumped by 1.2% and 1.3%, respectively.

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