China Market gains as US ease some restrictions on Huawei

Headline indices of the Mainland China equity market closed higher on Tuesday, 21 May 2019, as tension between US and China temporary reprieved today after US officials said it would grant 90-day reprieve from penalties to Huawei and its subsidiaries. At closing bell, the benchmark Shanghai Composite Index advanced 1.23%, or 35.37 points, to 2,905.97. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 1.77%, or 26.96 points, to 1,548.68. The blue-chip CSI300 index rose 1.35%, or 48.99 points, to 3,666.78.

The U.S. granted limited relief for consumers and carriers using Huawei Technologies, a day after the White House's moves against the Chinese telecom giant battered stocks. The U.S. government on Monday allowed Huawei Technologies Co Ltd to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets until Aug. 19.

The U.S. Commerce Department allowed Huawei Technologies to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets. The company is still prohibited from buying American parts and components to manufacture new products without license approvals that likely will be denied. The new authorization is intended to give telecommunications providers that rely on Huawei equipment time to make other arrangements, U.S. Secretary of Commerce Wilbur Ross said in a statement. The authorization, which is in effect for 90 days, suggests changes to Huawei's upply chain may have immediate, far-reaching and unintended consequences for its customers.

The U.S. move eased some worries that Sino-U.S. trade tensions would be further inflamed and inflict deeper losses on the Chinese currency.

Earlier, Alphabet's Google suspended business with Huawei that involves transferring hardware, software and other technical services. The U.S. search giant's decision followed U.S. President Donald Trump's administration adding Huawei to a list that required U.S. companies get a license to do business with the Chinese company. Bloomberg News also reported that companies like Intel, Qualcomm and Broadcom will not supply Huawei until further notice.

CURRENCY NEWS: China's yuan strengthened against the U.S. dollar on Tuesday, as China's central bank set firmer midpoint fixing and Washington temporarily eased restrictions on Huawei. In the spot market, onshore yuan opened at 6.9094 per dollar and was changing hands at 6.9024 at midday, 109 pips firmer than the previous late session close and 0.05 percent softer than the midpoint. The yuan has dropped around 2.5 percent since U.S. President Donald Trump said on 5 May 2019 he was going to raise tariffs on $200 billion of Chinese imports.

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