China Market falls on renewed Sino-U.S. trade tensions

The Mainland China equity market closed down on Monday, 3 September 2018, as investor sentiment was hit by a private survey data showing manufacturing growth slowed to a 14-month low in August and speculation that President Donald Trump's administration will impose tariffs on a further US$200 billion of Chinese imports as soon as this week. At closing bell, the benchmark Shanghai Composite Index declined 0.17%, or 4.52 points, to 2,720.73, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 0.17%, or 2.46 points, to 1,448.93. The blue-chip CSI300 index dropped 0.38%, or 12.68 points, to 3,321.82.

Shares of transportation sector declined after an official at China's state planner said on the weekend that China would strictly prevent haphazard investment and redundant development in the automobile industry.

ECONOMIC NEWS: China's manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month and employers cutting more staff, a private survey showed on Monday. Caixin's China general manufacturing PMI on a seasonally adjusted basis continued to be on the expansion territory, but the growth slumped to its 14-month low of a score of 50.6 in August. That was down from 50.8 in July. Output continued to expand, and a slower pace than in July. However, new orders rose at the slowest pace since May 2017, while the export sales declined for the fifth month in a row. Inflationary pressures meanwhile picked up, with firms noting steeper increases in both input costs and output charges.

CURRENCY NEWS: China's yuan weakened against the U.S. dollar on Monday, inline with softer mid-point fixing by People Bank of China and renewed US-China trade tension. The United States and Canada ended contentious trade negotiations without a deal over the weekend, while U.S. President Donald Trump has told aides he is ready to impose tariffs on $200 billion more in Chinese imports as soon as this week.

Prior to market opening on Monday, the People's Bank of China (PBOC) set the midpoint rate lower than expected at 6.8347 per dollar, 101 pips or 0.15 weaker than the previous fix of 6.8246. The spot market opened at 6.8444 per dollar and was changing hands at 6.8366 at midday, 56 pips weaker than Friday's late session close and 0.03 percent softer than the midpoint. The offshore yuan was trading 0.13 percent weaker than the onshore spot at 6.8455 per dollar.

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