China Stocks end mixed on IMF growth rate cut

The Mainland China equity market closed marginally lower after erasing earlier gains on Wednesday, 05 June 2019, as risk sentiments remain subdued after the International Monetary Fund cut its 2019 economic growth forecast for China to 6.2% on heightened uncertainty around trade frictions, citing that more monetary policy easing would be warranted if the Sino-U.S. trade war escalates. Market losses were, however capped after Chinese President Xi Jinping statement that the country's economy is stable, healthy and well placed to meet all risks and challenges. At closing bell, the benchmark Shanghai Composite Index declined 0.03%, or 0.86 point, to 2,861.42. The Shenzhen Composite Index, which tracks stocks on China's second exchange, was up 0.04%, or 0.62 point, to 1,494.77. The blue-chip CSI300 index fell 0.04%, or 1.37 points, to 3,597.10.

Chinese President Xi Jinping said the country's economy is stable, healthy and well placed to meet all risks and challenges. Xi made the remarks ahead of his state visit to Russia where he will attend a major Russian investor forum in St Petersburg. Xi noted China had ample room to manoeuvre in the macroeconomic policy space and that the country's economy got off to a good start in 2019 as key indicators were kept in a reasonable range.

China's economy grew at a steady 6.4% pace in the first quarter, defying expectations for a further slowdown, as industrial production jumped sharply and consumer demand showed signs of improvement. However, it reported surprisingly weaker growth in retail sales and industrial output for April, putting pressure on Beijing to roll out more stimulus as the trade war with the United States escalates.

The International Monetary Fund has cut its growth forecast for China, and warned that the trade war with the US is hurting. The Fund now expects China's economy to grow by 6.2% this year, down from 6.3% previously. That reverses a small upgrade earlier this year. The IMF also suggested that Beijing may need to stimulate its economy, if the trade war doesn't ease soon.

Investors remained on sideline amid concerns heightened international trade frictions could derail the global economy. U.S. Treasury Secretary Steven Mnuchin is set to meet with People's Bank of China Governor Yi Gang at a gathering of G-20 finance leaders this weekend in Japan. The meeting would mark the first face-to-face meeting between the two countries in nearly a month.

Investors are waiting to see if the leaders of China and the United States will meet to discuss trade issues on the sidelines of the G20 gathering after a recent escalation in the two sides' dispute rattled global markets.

Shares of pharmaceutical firms declined after news of Beijing's plans to carry out a quality check on the accounting information of the pharmaceuticals industry during June and July. According to a notice on Tuesday on China's Ministry of Finance's website, 77 pharmaceutical firms have been randomly selected for the check. Jiangsu Hengrui Medicine (600276 CH) fell over 3%, and Shanghai Fosun Pharmaceutical (600196 CH) dropped 4.6%.

CURRENCY NEWS: China yuan edged lower against greenback on Wednesday, after softer mid-point fixing by central bank. Prior to the market opening on Wednesday, the People's Bank of China (PBOC) set the midpoint rate at 6.8903 per dollar, 81 bps or 0.12% weaker than the previous fix of 6.8822. In the spot market, onshore yuan opened at 6.9080 per dollar and was changing hands at 6.9120 at around late afternoon, 37 bps weaker than the previous late session close.

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