China Market rises on optimism for a US-China trade war thaw

The Mainland China equity market closed higher on Tuesday, 27 August 2019, as market concerns eased over the ongoing U.S.-China trade conflict after President Donald Trump showed his willingness to resume dialogue with Beijing. Also, buying was supported by reports of A-share weighting increase by MSCI. At closing bell, the benchmark Shanghai Composite Index inclined 1.35%, or 38.63 points, to 2,902.19. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 1.87%, or 29.25 points, to 1,595.82. The blue-chip CSI300 index rose 1.36%, or 51.04 points, to 3,816.95.

US President Donald Trump said on Monday that Chinese officials had contacted their U.S. trade counterparts and offered to resume negotiations, an assertion that China declined to confirm. His comments helped temper sharp losses in global markets after both sides announced new tariffs on Friday, in the latest escalation in the protracted trade dispute.

Investors will watch for further developments on the ongoing trade war between Beijing and Washington. Apart from the trade war, the equity markets also have to keep an eye on Brexit proceedings, monetary policy of key players such as the European Central Bank and moves in the Chinese yuan.

China has allowed the tightly-managed yuan to slide roughly 4% so far this month as trade tensions with the United States worsened. This has triggered fears of a global currency war, in which countries try to weaken their currencies in an attempt to soften the blows of a broader economic slowdown.

MSCI said it will add eight Chinese stocks to the MSCI China Index, with an inclusion factor of 15 per cent. It will give China-listed shares a weighting of 7.79 per cent and 2.46 per cent in the MSCI China and MSCI Emerging Markets indexes respectively, according to a recent statement by MSCI.

CURRENCY NEWS: The Chinese currency weakened against the dollar on Tuesday after softer mid-point fixing by the central bank. Prior to the market opening, the People's Bank of China (PBOC) fixed the yuan's midpoint at 7.0810 per dollar, 240 bps, or 0.34%, weaker than the previous fix of 7.0570. Onshore spot yuan was changing hands at 7.1600, weaker by 80 bps than the previous late session close. Its offshore counterpart was at 7.1715 per dollar.

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