China Market rises as concessions raise trade hopes

The Mainland China equity market closed higher for the first time in three sessions in row on Thursday, 12 September 2019, as investors cheered gestures of goodwill in the bruising U.S.-China trade war after U.S. President Donald Trump agreed to delay an additional hike in tariffs on Chinese goods due in October by two weeks, after China announced tariff exemptions for a basket of U.S. goods. Meanwhile expectations of more stimulus from Beijing after latest bank lending data also underpinned the market mood. At closing bell, the benchmark Shanghai Composite Index inclined 0.75%, or 22.42 points, to 3,031.24. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.58%, or 9.69 points, to 1,681.23. The blue-chip CSI300 index added 1.08%, or 42.28 points, to 3,972.38.

Investors expectation for a thaw in US-China trade frictions came as U.S. President Donald Trump said on Wednesday that increased tariffs on 250 billion dollars worth of Chinese goods (25% to 30%) that were set to kick in on October 1 have now been delayed to October 15 as a gesture of good will. Trump said the decision was made at the request of Chinese Vice Premier Liu He and in consideration of the 70th anniversary celebrations of the People's Republic of China. The concession followed China delaying duties on 16 specific US imports for a year, and comes ahead of trade talks in October.

The world's two largest economies have been locked in a year-long battle over Beijing's trade practices that has threatened to push other economies into recession. The gestures of goodwill raise hopes both sides can narrow their differences before working-level resume talks in mid-September and high-level trade negotiations that are expected in October.

China's banks extended new yuan loans in August as policymakers ratcheted up support for the slowing economy, and further policy easing is expected in coming weeks as the Sino-U.S. trade dispute takes a bigger toll on the economy. August lending data is in line with market expectations. It shows increased support for the real economy. In the next step, monetary policy is expected to be preemptive and flexible, there is room for cutting interest rates and reserve requirements.

Shares of financials were higher, with Ping An Insurance (601318 CH) up 3.1% at 92.34 yuan, and China Life Insurance (601628 CH) up 1.8% to 29.8 yuan. People's Insurance Company (Group) (601319 CH) rose 2.8% to 9.42 yuan.

Chinese brokerages were up on improved August profits. Haitong Securities (600834 CH) jumped 5.6% to 16.54 yuan, while Citic Securities (600030 CH) rose 1.3% to 24.71 yuan.

CURRENCY NEWS: China yuan rose against greenback on Thursday, despite soft mid-point fixing by central bank, as the U.S. President Donald Trump postponed ramping up tariffs on Chinese goods "as a gesture of good will", after Beijing spared duties on some U.S. exports hours earlier. Prior to market opening, the People's Bank of China set the midpoint at 7.0846 per dollar, 3 bps softer than the previous fix of 7.0843. Spot yuan changed hands at 7.0848 per dollar, 0.44% stronger than the previous late session close of 7.1159.

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