China Market rebounds on bargain buying

Headline indices of the Mainland China equity market rebounded on Tuesday, 30 April 2019, as investors chased for bottom hunting following steep losses in recent sessions. However, market gains were capped after weaker Chinese manufacturing data and on caution before trade negotiations between the U.S. and China later in the day. Around late afternoon, the benchmark Shanghai Composite Index added 0.28%, or 8.56 points, to 3,071.06. The Shenzhen Composite Index, which tracks stocks on China's second exchange, grew 0.26%, or 4.21 points, to 1,629.83. The blue-chip CSI300 index grew 0.17%, or 6.72 points, to 3,907.05. Mainland markets will be shut from Wednesday for a three-day break.

Factory activity in China expanded for a second straight month in April but at a much slower pace than expected, an official survey showed on Tuesday, suggesting the economy is still struggling for traction despite a flurry of support measures. Reading on the official Purchasing Managers' Index (PMI) for manufacturing unexpectedly fell to 50.1 in April from March's reading of 50.5 stoking concerns about the economic state of China and pressuring Asian equities lower. Data from a private business survey, the Caixin/Markit factory PMI, fell to 50.2 in April lower than the March reading of 50.8. A reading above 50 indicates expansion, while a reading below that signals contraction.

Meanwhile, trade negotiations between the U.S. and China are set to resume in Beijing later in the day. Trade talks between the world's dominant economies are in the decisive phase that will determine whether a final agreement is possible, US Treasury Secretary Steven Mnuchin said Monday of negotiations with China. Mnuchin and US Trade Representative Robert Lighthizer travel to Beijing this week for another round of talks with Chinese negotiators starting Tuesday, and they will meet next week in Washington to try to finalize a deal that President Donald Trump has demanded to repair what he calls and unfair and unbalanced relationship. Trump imposed steep punitive tariffs on more than $250 billion in imports from China, and Beijing has retaliated with duties on $110 billion in US goods. US businesses nationwide report that the tariffs are raising costs on key inputs for production, and the uncertainty is causing them to delay investments and hiring.

Investors now await a raft of economic data from the euro zone and will also focus on the commencement of the Federal Open Market Committee (FOMC) meeting that will determine the future trajectory of interest rates in the United States. The US central bank is widely expected to hold interest rates steady as policymakers balance recent stronger-than-expected U.S. economic growth against sluggish inflation.

CURRENCY NEWS: China's yuan strengthened against the U.S. dollar on Tuesday, on firm mid-point fixing by central bank amid month-end corporate demand for the dollar. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7286 per dollar, 24 bps stronger than the previous fix of 6.7310.

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