China Market recovers on signals of more stimulus, fewer virus deaths

Mainland China equity market finished session slight higher on Thursday, 27 February 2020, as investors continued bottom fishing after fewer death reported from coronavirus cases and on hopes of stimulus support to underpin domestic economy. However, market gains capped amid intensifying worries over the global contagion of the virus. At closing bell, the benchmark Shanghai Composite Index recovered 0.11%, or 3.40 points, to 2,991.33. The Shenzhen Composite Index, which tracks stocks on China's second exchange, was up 0.24%, or 4.53 points, to 1,895.13. The blue-chip CSI300 index advanced 0.29%, or 11.86 points, to 4,084.88.

Mainland China reported 433 new cases of virus infections on Wednesday, the National Health Commission said on Thursday, up from 406 on the previous day. The number of new deaths stood at 29, the lowest daily rate since Jan. 28 and down from 52 on the previous day. The outbreak has now killed a total of 2,744 people.

The central bank has taken steps to support the economy, including reducing interest rates and flushing the market with liquidity. It has also said it will provide special funds for banks to lend to businesses. It is expected that Beijing will take more proactive countercyclical policies and the environment of monetary loosening will continue

China's central bank said on Thursday that it will ensure ample liquidity through targeted reserve requirement ratio (RRR) cuts in appropriate time. The People's Bank of China will continue to use special loans to small and medium banks and conduct open market operations, standing loan facilities, and medium-term loan facilities to boost liquidity.

In an upbeat signal, the ruling Communist Party declared on Wednesday that China's economic recovery is accelerating, though it also warned the country not to ignore the risks of a resurgence in infections in certain regions.

The World Health Organization has pointed out that currently most of the new cases are occurring outside of China, the market's focus has switched from China to the (rest of the) world.

Shares of the food industry jumped. Liquor distiller Kweichow Moutai advanced 1.3% to 1,087.39 yuan. Muyuan Foodstuff, China's second-largest pork producer, advanced 2.2% to 118.60 yuan. Three Squirrels, China's largest nut snack producer, shot up 3.6% to 66.50 yuan.

Apple suppliers slipped. GoerTek dipped 3.2% to 24.13 yuan, while Luxshare Precision fell 1.8% to 46.76 yuan. Both make Apple AirPods.

CURRENCY NEWS: China's yuan edged up against the dollar on Thursday, as China reported the slowest daily increase in coronavirus deaths in almost a month. Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 7.0215 prior to the open, weaker than the previous session's fixing of 7.0126. The onshore yuan CNY=CFXS traded 0.07% firmer at 7.0180 per dollar at 0412 GMT, while the offshore yuan CNH=D3 was a touch softer at 7.0268.

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