China Market gains for first time in four sessions

The Mainland China equity market closed higher for the first time in four straight sessions on Friday, 19 July 2019, as investors chased for bottom fishing on the rising odds of aggressive rate cuts by the US Federal Reserve to stave off a recession in the world's largest economy. At closing bell, the benchmark Shanghai Composite Index added 0.8%, or 23.02 points, to 2,924.20. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.75%, or 11.63 points, to 1,560.27. The blue-chip CSI300 index rose 1.05%, or 39.56 points, to 3,807.96.

Mainland China market commenced trading with firm footing as appetite for riskier assets underpinned after New York Fed President John Williams said on Thursday that policymakers need to add stimulus early to deal with too-low inflation when interest rates are near zero and cannot wait for economic disaster to unfold, in a speech read as a strong argument in favour of quick action. The comments by Williams made it a virtual certainty the Fed would opt to cut interest rates by 25 basis points (bps) at its July 30-31 policy meeting and also fuelled expectations of an even deeper 50 bp reduction.

The dovish Fed expectations are helping markets stay in the green despite tensions in the Middle East. The US President Donald Trump said on Thursday that an American Navy ship had destroyed an Iranian done in a defensive action. The announcement came hours after Iranian forces seized a foreign tanker it accused of smuggling oil.

Market will remain focused on developments in the Sino-U.S. trade talks, said a trader at a Chinese bank, noting huge uncertainty around whether both sides are able to pull off a durable deal. Those uncertainties were underscored earlier in the week when U.S. President Donald Trump reiterated a threat to slap tariffs on more Chinese goods.

CURRENCY NEWS: China yuan appreciated against greenback on Friday, after firmer midpoint fixing by central bank and as comment from top Federal Reserve official cemented expectations of a U.S. interest rate cut later this month. The People's Bank of China (PBOC) set the midpoint rate at 6.8635 per dollar, 26 bps or 0.18% firmer than the previous fix of 6.8761. In the spot market, onshore yuan opened at 6.8755 per dollar and was changing hands at 6.8736 at midday, 69 pips firmer than the previous late session close.

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