China Market extends gain on stimulus hopes, trade talks

The Mainland China equity market closed higher on Thursday, 05 September 2019, as risk appetite buying underpinned by hopes Beijing will free up the amount of cash banks must keep as reserves to shore up the economy, and after news the United States and China had agreed to ministerial-level trade talks in Washington in coming weeks. Meanwhile, robust economic data from China, easing political tensions in Hong Kong and British lawmakers' approval of a law to delay Brexit provided a dose of optimism to investors worried about global growth. At closing bell, the benchmark Shanghai Composite Index inclined 0.96%, or 28.45 points, to 2,985.87. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.93%, or 15.23 points, to 1,651.23. The blue-chip CSI300 index added 1%, or 39.32 points, to 3,925.32.

China will implement both broad and targeted cuts in the reserve requirement ratio (RRR) for banks "in a timely manner," China's cabinet said in a meeting on Wednesday, an indication that a cut in the key ratio aimed at boosting lending could be imminent.

Meanwhile, Chinese officials announced that they've agreed with the United States to hold another round of trade talks in Washington next month. China's Commerce Ministry on Thursday announced that the country's Vice Premier and chief trade negotiator Liu He has spoken with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, and that both sides agreed to meet in Washington in October. The two sides will continue talking before then, according to the Commerce Ministry. A spokesperson for Lighthizer's department confirmed the two sides talked and agreed to hold talks in the US capital "in the coming weeks."

In China, activity in the services sector expanded at the fastest pace in three months in August, providing a boost to the world's second-largest economy, which has been struggling to reverse a prolonged slump in its manufacturing sector. Activity in China's services sector expanded at the fastest pace in three months in August as new orders rose, prompting the biggest increase in hiring in over a year, a private survey showed. The Caixin/Markit Services Purchasing Managers' Index came in at 52.1 in August, its highest since May. The 50-mark in PMI readings separates growth and contraction. Official data for August released over the weekend showed services sector activity picking up for the first time in five months in August.

Lawmakers in Britain's lower house of Parliament voted to approve legislation designed to prevent Prime Minister Boris Johnson's government from taking the country out of the European Union without a deal.

The reports, subsequently confirmed, that Hong Kong leader Carrie Lam would formally withdraw a controversial extradition bill that sparked months of protests in the financial hub.

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