China Stocks end lower on geopolitical tensions

Mainland China equity market finished session lower on Friday, 03 January 2020, on heightened geopolitical tensions (US-Iran) after news that a US airstrike in Baghdad killed a top Iranian military commander. However, market losses capped Chinese central bank's decision to lower the amount of cash that all banks must hold as reserves in a bid to free up billons of dollars and after a private survey on Thursday revealed that Chinese production activity in December continued to grow and business confidence had strengthened. At closing bell, the benchmark Shanghai Composite Index eased 0.05%, or 1.41 points, to 3,083.79. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.27%, or 4.69 points, to 1,760.85. The blue-chip CSI300 index was down by 0.18%, or 7.28 points, to 4,144.96. For the week, CSI300 was up 3.1%, while Shanghai Composite Index advanced 2.6%, both logging fifth week of gains in a row.

Market sentiments hurt on heightened geopolitical tensions after news that a US airstrike in Baghdad killed a top Iranian military commander.

Meanwhile, Chinese central bank's decision to lower the amount of cash that all banks must hold as reserves in a bid to free up billons of dollars and sign of initial Sino-U.S. trade deal progress aided sentiment. Earlier this week, President Donald Trump tweeted that he will sign the initial trade deal with China at the White House this month. He also said he plans to travel to Beijing at a later date to open talks on other sticking points in the dispute that remain to be worked out, including Chinese practices the U.S. complains unfairly favor its own companies. That came following reports indicating Chinese Vice Premier Liu He, Beijing's top trade negotiator, could sign the agreement.

Investors continued to wait for Washington and Beijing to formalize an initial trade deal that has helped ease the market's jitters over the 18-month dispute between the world's two biggest economies. Washington and Beijing announced last month that they reached an agreement over a "Phase 1" trade pact that calls for the U.S. to reduce tariffs and China to buy larger quantities of U.S. farm products.

The People's Bank of China announced on Wednesday that it will lower the reserve requirement ratio for banks by 50 basis points with effect from Jan. 6, unleashing about 800 billion yuan ($115 billion) in funds. The move is expected to boost the country's slowing economy ahead of the Lunar New Year, which falls on Jan. 25.

Sentiment got a further boost after a private survey on Thursday revealed that Chinese production activity in December continued to grow and business confidence had strengthened, hinting at a recovery in the economy in the wake of a Phase 1 trade deal with the United States.

Liquor companies were top losers. The world's most valuable liquor maker Kweichow Moutai slumped 4.6% to a near four-month low, extending its sharp 4.5% correction from Thursday, after the consumer giant forecast full-year profit below estimates.

Gold-linked stocks gained, with a gauge tracking them rising nearly 3%, on risk concerns after the US launched an air strike that killed a top Iranian military leader.

Powered by Capital Market - Live News