China Market surges 1.06% on stimulus, index inclusion

The Mainland China equity market closed session higher on Friday, 28 September 2018, in line with an Asia-wide rally following a strong lead from Wall Street. Meanwhile, risk sentiment was further boosted up by Chinese government stimulus measures to offset the impact of a trade war and on expectations that more Chinese shares will be included in mainstream global benchmarks. However, market gains were limited as many market participants were unwilling to hold large positions amid global market uncertainty and ahead of China's upcoming long public holiday. The benchmark Shanghai Composite Index inclined 1.06%, or 29.58 points, to 2,821.35, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.83%, or 11.93 points, to 1,441.54. The blue-chip CSI300 index rose 1.04%, or 35.27 points, to 3,438.86. For the week, CSI300 rose 0.8%, and Shanghai Composite Index gained 0.9%. China's financial markets will be closed next week for the National Day holiday.

U.S. President Donald Trump's administration started levying additional tariffs on $200 billion of Chinese goods on Monday. Beijing retaliated with fresh tariffs on $60 billion of U.S. products, and has unveiled a raft of stimulus measures to support consumption and economic growth.

As per reports, Chinese fund managers boosted their suggested equity exposure to a seven-month high in September, as Beijing's stimulus measures to counter the impact of the Sino-U.S. trade war appeared to have soothed investor nerves.

Sentiment was also aided by FTSE Russell's decision this week to include mainland Chinese stocks in its global benchmarks, and proposals by rival index publisher MSCI to boost China's index weighting. FTSE Russell said on Thursday it will start including mainland shares in its flagship indexes from June next year, in a move that it expects will draw initial net inflows of $10 billion from passive investors. The FTSE announcement came a day after rival MSCI said it would consider boosting the Chinese share weighting in its indexes next year, potentially triggering $66 billion in broad foreign inflows.

CURRENCY NEWS: China's yuan declined against the U.S. dollar on Friday, inline with soft mid-point fixing by People Bank of China. Prior to the market opening on Friday, the People's Bank of China (PBOC) set the midpoint rate at 6.8792 per dollar, the weakest level since Aug.17, 150 pips or 0.2 weaker than the previous fix of 6.8642. In the spot market, the yuan was changing hands at 6.8830, 60 pips firmer than the previous late session close. The offshore yuan was trading 0.04% firmer than the onshore spot at 6.8803 per dollar.

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