China Market falls on soft loan growth, Sino-U.S. tensions

The China share market finished lower for second straight session on Wednesday, 12 August 2020, as risk aversion selloff continued on weaker-than-expected loan growth and lingering Sino-US tensions. Sentiments were also downbeat ahead of a meeting between top U.S. and Chinese trade officials on Saturday to review the first six months of the Phase 1 trade deal.

At closing bell, the benchmark Shanghai Composite Index dropped 0.63%, or 21.02 points, to 3,319.27. The Shenzhen Composite Index, which tracks stocks on China's second exchange, declined 1.26%, or 28.34 points, to 2,215.11. The blue-chip CSI300 index fell 0.73%, or 34.14 points, to 4,647.64.

New bank lending in China fell more than expected in July from the previous month. Chinese banks extended 992.7 billion yuan ($142.82 billion) in new yuan loans in July, down sharply from 1.81 trillion yuan in June, according to data released by the People's Bank of China (PBOC) on Tuesday. The new loans were lower than 1.06 trillion yuan a year earlier. Household loans, mostly mortgages, fell to 757.8 billion yuan in July from 978.8 billion yuan in June, while corporate loans dipped to 264.5 billion yuan from 927.8 billion yuan. Broad M2 money supply in July grew 10.7% from a year earlier, compared with 11.1% growth in June. Outstanding yuan loans grew 13% from a year earlier compared with 13.2% growth in June.

Investors were awaiting a meeting between top U.S. and Chinese trade officials on Saturday to review the first six months of the Phase 1 trade deal. The talks will take place amid rising tensions between the United States and China. On Tuesday, U.S. President Donald Trump said that his relationship with Chinese President Xi Jinping had soured due to the COVID-19 pandemic, though a top White House economic adviser said that the trade deal remains in "fine" shape.

CURRENCY NEWS: The yuan was tad lower against greenback on Wednesday, despite firmer mid-point fixing by central bank, ahead of key trade talks between top Chinese and U.S. officials this weekend. Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 6.9597 per dollar, 0.16% stronger than the previous fix of 6.9711.

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