China Market extends fall on talks of less stimulus

Headline indices of the Mainland China equity market closed down for second straight day on Tuesday, 23 April 2019, as profit booking selloff continued after a flurry of comments from policymakers signaled they're less comfortable about adding stimulus. At closing bell, the benchmark Shanghai Composite Index declined 0.51%, or 16.45 points, to 3,198.59 The Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 1.32%, or 23.05 points, to 1,728.86. The blue-chip CSI300 index shed 0.16%, or 6.60 points, to 4,019.01.

Top-ranking policymaking bodies including the Politburo, the State Council, the central bank and the Central Financial and Economic Affairs Commission have all held meetings in the last two weeks.

China should fine-tune monetary policy in a pre-emptive way based on economic growth and price changes, according to a top-level meeting reports chaired by President Xi Jinping. Monetary policy needs to be neither too tight, nor too loose and should be fine-tuned in a timely and pre-emptive way based on economic growth and changes in price situations, the Central Financial and Economic Affairs Commission said. The meeting pointed out that it is necessary to strengthen regulation of countercyclical macro policy and strive to put tax cuts and fee reduction in place as soon as possible. Greater efforts should be made to improve business environment, accelerate the upgrading of the economic structure, improve capabilities to innovate in science and technology, and speed up green development. President Xi also stressed targeted efforts to improve weak links in building a moderately prosperous society in all respects. Xi said the country had achieved decisive progress in building a moderately prosperous society in all respects. However, there remain weak areas that should be faced squarely and dealt with targeted efforts. He also called for courage and wisdom to tackle problems and good implementation of the decisions taken at the central economic work conference.

Meeting of the Politburo was interpreted by traders as meaning the economy is on a stable enough footing that extended support isn't needed. People have come to a clear consensus that there won't be any aggressive stimulus that floods the economy with excessive liquidity. The central bank last week gave a signal that supply of cash would be less liberal, when it rolled over only half of the funds coming due through one of its longer-term policy tools, instead offering more seven-day money.

Airline stocks declined on US decision to stop waiving sanctions on buyers of Iran oil. Aviation oil is the largest operating cost for airlines. Crude oil prices jumped more than 2% on Monday on growing concern about tight global supplies after the United States announced a further clampdown on Iranian oil exports. Washington said it would eliminate in May all waivers allowing eight economies to buy Iranian oil without facing US sanctions. International benchmark Brent crude soared 2.9% to settle at $74.04 a barrel on Monday and US West Texas Intermediate crude jumped 2.7% to settle at $65.70. Both indexes climbed to nearly six-month highs during the session. US crude futures last traded at $65.78 per barrel, up 0.4% on the day. China Southern Airlines fell 1.9 per cent to 8.31 yuan and Air China dropped 2.4 per cent to 10.15 yuan. China Eastern Airlines fell 8.2 per cent to 5.49 yuan.

Pork-linked stocks rallied as China officials predict 'significant' increase in pork prices. A "significant" increase in pork prices is ahead in the second half of this year, likely exceeding the record high in 2016, senior officials from the Ministry of Agriculture and Rural Affairs said at a news conference. The outbreak of African swine fever beginning last August has led to 1.02 million pigs being killed. During the first week of April, the price of pork has increased 17.4% from March, at 15.15 yuan per kilogram. Compared to a year-ago, the price increase is 36%, an official was quoted as saying. Tangrenshen Group (002567 CH) jumped 4.1% to 18.15 yuan, and Tecon Biology (002100 CH) shot up 6% to 12.02 yuan.

CURRENCY NEWS: China's yuan was little changed against the U.S. dollar on Tuesday, as soft mid-point fixing by central bank. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7082 per US dollar, weakened by 47 bps than the previous fix of 6.7035. In the spot market, the yuan opened at 6.7105 per dollar and was changing hands at 6.7123 at midday, only 1 bps weaker than the previous late session close.

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