China Market extends bull-run for 7th day

The China share market finished higher for seventh straight session on Wednesday, 08 July 2020, as market sentiment was lifted on hopes of recovery in the Chinese economy after government pledged more spending as the COVID-19 pandemic ravaged the world's second-biggest economy.

At closing bell, the benchmark Shanghai Composite Index added 1.74%, or 58.10 points, to 3,403.44. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 1.88%, or 40.68 points, to 2,198.62. The blue-chip CSI300 index gained 1.61%, or 75.87 points, to 4,774.00.

China dropped its annual growth target this year for the first time since 2002 and pledged more government spending as the COVID-19 pandemic ravaged the world's second-biggest economy. Premier Li Keqiang has said that growth in M2 - a broad gauge of money supply - and total social financing will be significantly higher this year. Broad M2 money supply growth in June was seen at 11.1%, unchanged from the pace of expansion in the previous month. Annual outstanding yuan loan was expected to grow 13.2% for June, also the same as for May. The People's Bank of China has already rolled out a raft of easing steps since early February, including bank reserve requirement cuts and targeted lending support for virus-hit firms.

The central bank cut the re-discount and re-lending rates by 25 basis points as of July 1 to reduce funding costs for smaller firms and rural sectors. Beijing has been leaning more heavily on fiscal stimulus to weather the downturn, cutting taxes and issuing local government bonds to fund infrastructure projects. The government has fixed the quota on local-government special bond issuance at 3.75 trillion yuan, up from 2.15 trillion yuan last year, and the finance ministry said on Wednesday that 59.5% of that quota has already been used up in the first half of this year. China has also started to issue 1 trillion yuan in special treasury bonds to help cope with the pandemic's impact on the economy. Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity.

CURRENCY NEWS: The yuan retreated from a near four-month high hit a day earlier, as investors were discouraged a broadly stronger dollar and a weaker-than-expected official yuan guidance rate set by the central bank. Prior to market opening, the People's Bank of China (PBOC) fixed the midpoint rate CNY=PBOC at 7.0207 per dollar, 103 pips, or 0.15%, firmer than the previous fix of 7.0310, and the strongest since March 17. The spot yuan CNY=CFXS opened at 7.0220 per dollar and was changing hands at 7.0177 at midday, 47 pips weaker than the previous late session close. It hit a high of 7.0002 per dollar on Tuesday, the loftiest level since March 17.

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