China Market falls after dissapointing Industrial Production growth data

The Mainland China equity market closed marginally lower on Monday, 16 September 2019, as investors risk sentiments were subdued after release of weaker than expected China's industrial production growth, fixed investment, and retail sales data for August. At closing bell, the benchmark Shanghai Composite Index edged down 0.02%, or 0.48 point, to 3,030.75. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.23%, or 3.86 points, to 1,285.09. The blue-chip CSI300 index shed 0.37%, or 14.66 points, to 3,957.72.

China's industrial production growing at its weakest pace in 17-1/2 years in August 2019, amid rising US trade pressure and softening domestic demand. Retail sales and investment gauges also worsened, reinforcing expectation that China likely to cut some of its key interest rates this week for the first time in over three years to prevent a sharper slump in activity.

Industrial output growth unexpectedly weakened to 4.4% in August from the same period a year earlier, the slowest pace since February 2002 and receding from 4.8% in July, the National Bureau of Statistics reported Monday. Retail sales growth eased to 7.5%, from 7.6% in July. Fixed-asset investment rose 5.5% for the first eight months of the year from the same period in 2018, down from Jan-July's 5.7%.

China is in the midst of a more-than-a-year-long trade war with the US that has upended global supply chains. Trade negotiators are expected to meet later this month, with a top-level summit meeting to be held in Washington in October, though a resolution appears unlikely.

Market experts expect a cut in the central bank's medium-term loan facility rate (MLF) as early as Tuesday, which would open the way for a reduction in the new loan prime benchmark rate (LPR) later in the week. But room for stimulus is believed to be limited by worries about rising debt risks, with policy easing by the People's Bank of China (PBOC) expected to be more restrained than the U.S. Federal Reserve or European Central Bank.

Earlier this month, the PBOC cut the amount of cash banks are required to hold in reservefor the seventh time since early last year. The move was expected to release 900 billion yuan ($126.35 billion) for lending to businesses that are strapped for credit.

CURRENCY NEWS: China yuan strengthened against greenback on Monday, after firmer mid-point fixing by central bank. Prior to market opening, the People's Bank of China set the midpoint at 7.0657 per dollar, 189 bps stronger than the previous fix of 7.0846.

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