China Market edges up ahead of US-China tariff hikes

The Mainland China equity market closed higher in volatile trade on Thursday, 23 August 2018, as caution prevailed ahead of the imposition of the latest round of tariffs by the United States and China on each other's goods due later today. At closing bell, the benchmark Shanghai Composite Index inclined 0.37%, or 10.02 points, to 2,724.63, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.63%, or 9.81 points, to 1,463.70. The blue-chip CSI300 index added 0.37%, or 12.08 points, to 3,320.03.

Many market participants are awaiting outcome of the lower-level trade talks between the United States and China due Thursday. U.S. and Chinese officials met for the first time in over two months to find a way out of their deepening trade conflict, but there was no evidence the low-level discussions would halt a new round of U.S. tariffs due Thursday.

Instead, President Donald Trump is going ahead with escalating the China trade war. The U.S. slaps Trump tariffs on $16 billion worth of Chinese products on Thursday, with China set to retaliate. The U.S. and China already set tariffs on $34 billion worth of goods, with America mulling Trump tariffs on a further $200 billion.

U.S. Fed Chair Jerome Powell and other central bankers will meet at Jackson Hole on Friday to discuss the root causes of stubbornly low inflation, slow wage growth and tepid productivity gains.

Political developments in the United States have had limited effects, at least so far. US President Donald Trump's former lawyer, Michael Cohen, pleaded guilty to campaign finance violations on Tuesday and former campaign manager, Paul Manafort, was found guilty on charges of tax and bank fraud.

CURRENCY NEWS: China's yuan slipped against the U.S. dollar on Thursday, inline with soft mid-point fixing by central bank, Washington and Beijing delivered on their threats to impose new tariffs, and greenback strength in international market after minutes of the Federal Reserve's latest meeting suggested the U.S. central bank is on course to further raise interest rates. Prior to Thursday's market opening, the People's Bank of China set the yuan's midpoint rate at 6.8367 per dollar, largely matching forecasts, and 96 pips weaker than the previous fix of 6.8271. In the spot market, the onshore yuan opened at 6.8568 per dollar and weakened to 6.8741 at one point, the lowest level since Aug.17. As of midday, the spot yuan was changing hands at 6.8728 at midday, 340 pips weaker than the previous late session close and 0.53 percent softer than the midpoint.

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