China Market rises on slowdown in new coronavirus cases

Mainland China equity market finished session higher on Tuesday, 07 April 2020, as risk appetite buying flourished after further targeted monetary stimulus by the central bank over the break. Meanwhile, sentiment was boosted by continuing optimism that the deadly coronavirus epidemic may be waning in some key epicenters and on overseas capital flooding into Chinese mainland markets. At closing bell, the benchmark Shanghai Composite Index inclined 2.05%, or 56.78 points, to 2,820.76. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 3.18%, or 53.80 points, to 1,743.37. The blue-chip CSI300 index grew 2.28%, or 84.80 points, to 3,798.02.

The mostly upbeat tone in markets comes amid more signs that the coronavirus crisis may be easing in some areas. Italy, France, Germany and Spain reported lower numbers of new cases. In New York, Governor Andrew Cuomo said deaths were showing indications of hitting a plateau. U.K. deaths slowed for a second day, even as they passed the grim milestone of 5,000.

Mainland China reported on Tuesday a drop in cases of the new coronavirus after closing its borders to virtually all foreigners to curb imported infections, while the central city of Wuhan, the epicentre of the outbreak, did not record any virus-related deaths for the first time since the outbreak began.

China's central bank said on Friday it was cutting the amount of cash that small banks must hold in reserve, releasing around 400 billion yuan ($56.38 billion) in liquidity to shore up an economy jolted by the coronavirus outbreak. China has about 4,000 small and mid-sized banks. The latest cuts would lower their RRR to 6%.

Overseas capital poured into the Chinese mainland on Tuesday, with the net influx into mainland markets exceeding 12.67 billion yuan via Stock Connect schemes linking Shanghai and Shenzhen with Hong Kong. More than 150 listed companies on the Chinese mainland surged by the daily limit of 10%.

Meanwhile, sentiment was boosted by expectations OPEC and other top producers will reach a deal this week to reduce production, after a Saudi-Russia price war began right when the virus was already hammering demand.

CURRENCY NEWS: China's yuan appreciated against the dollar, as China central bank fixed firmer mid-point rate. Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC at 7.0939 per dollar, 165 pips or 0.23% firmer than the previous fix of 7.1104, the highest since April 1. In the spot market, onshore yuan CNY=CFXS opened at 7.0889 per dollar and rose to a high of 7.0750 at one point, the strongest level since March 27.

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