China Market falls on downbeat manufacturing data, slowdown concerns

Headline shares of the Mainland China equity market declined in 2019's first trading session on Wednesday, 02 January 2019, after a private survey showed manufacturing activity in China for the month of December contracting for the first time in 19 months. In afternoon trade, the benchmark Shanghai Composite Index dropped 1%, or 25.09 points, to 2,468.81, marking lowest close since November 2014. The Shenzhen Composite Index, which tracks stocks on China's second exchange, declined 0.5%, or 6.01 points, to 1,261.85. The blue-chip CSI300 index was down 1.2%, or 36 points, to 2,974.67. The Shanghai Composite ended 2018 with an overall 25% decline, making it the world's worst-performing stock benchmark.

Figures on Wednesday showed China's manufacturing sector contracted for the first time in 19 months in December, with the Caixin-Markit manufacturing purchasing managers' index dropping from 50.2 in November to 49.7, below the 50-point level separating expansion from contraction. It also mirrored the official reading from the National Bureau of Statistics released on Monday, which fell from 50 in November to 49.4 in December, its lowest level since January 2016. The private survey focuses on small and medium-sized enterprises while the official PMI gauge focuses on large companies and state-owned enterprises.

The US-China trade war continues to be a wild card for equities. A US delegation will hold trade talks with Chinese officials in Beijing next week to try to iron out differences over such things as market access and intellectual property protection.

Health care stocks suffered heavy losses on concern a pilot programme of centralised procurement of generic drugs that has cut prices by half will erode profits. Yanan Bicon Pharmaceutical Listed tumbled by the daily limit of 10% to 18.97 yuan and Kangmei Pharmaceutical also dropped by that much to 8.29 yuan.

CURRENCY NEWS: China yuan strengthened against greenback on Wednesday, as central bank set stronger mid-point rate. Prior to market opening, the People's Bank of China set the midpoint rate at 6.8482, stronger by 150 basis points from previous day's central parity rate.

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