China Market tumbles 1.74%

The Mainland China equity market closed steep lower on Tuesday, 17 September 2019, amid disappointment after the People's Bank of China (PBOC) kept a key money rate unchanged even as recent readings pointed to further downward pressure on the world's second-largest economy. Most stocks declined, with Sci-tech companies in the sectors of electronics, software and communications led the losses. Bucking the trend, companies related to public affairs and natural gas were among the gainers. At closing bell, the benchmark Shanghai Composite Index tumbled 1.74%, or 52.64 points, to 2,987.12. The Shenzhen Composite Index, which tracks stocks on China's second exchange, retreated 2%, or 33.74 points, to 1,651.35. The blue-chip CSI300 index shed 1.68%, or 66.50 points, to 3,891.22.

Traders' hope of aggressive policy easing was dashed today, when the People's Bank of China partially rolled over loans from its one-year liquidity facility but kept the lending rate unchanged, a funding tool for commercial lenders, via the open-market operation, a sign it is willing to maintain adequate credit to support a slowing economy but wary of excessive stimulus.

China central bank's move to conduct a 200 billion-yuan (US$28.3 billion) medium-term lending facility today was also lower than the maturing one of 265 billion yuan. The central bank refrained from further loosening, mainly because it already released 800 billion yuan through a 50 basis points cut in banks' reserve requirement ratio that took effect yesterday.

Investors now await the latest developments in the Sino-U.S. trade talks, while doubts remain over the progress the two sides could make this time. Deputy-level U.S.-China trade talks are scheduled to start in Washington on Thursday, the U.S. Trade Representative's office said on Monday, paving the way for high-level talks in October aimed at resolving a bitter, 14-month trade war.

CURRENCY NEWS: China yuan weakened against greenback on Tuesday, after firmer mid-point fixing by central bank. Prior to market opening, the People's Bank of China set the midpoint at 7.0730 per dollar, 73 bps weaker than the previous fix of 7.0657.

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