China Stocks extend gains on upbeat PMI data, Sino-U.S. trade talks optimism

Headline indices of the Mainland China equity market advanced on Tuesday, 02 April 2019, as sentiment for equities bolstered in the wake of better-than-expected factory activity data in China and the United States, In addition, a progress in trade talks between the world's top two economies also boosted investor sentiment. The reduction in the value-added tax to 13 percent from 16 percent effective from 1 April 2019, , boosted market sentiment. At closing bell, the benchmark Shanghai Composite Index added 0.2%, or 6.46 points, to 3,176.82. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.11%, or 1.94 points, to 1,757.60. The blue-chip CSI300 index fell 0.07%, or 2.64 points, to 3,971.29.

The U.S. ISM index for manufacturing rose from a two-year low Monday. That followed better than expected China manufacturing PMIs for March, assuaging growth concerns, though manufacturing data for Europe came in at the lowest since 2013. Meanwhile, U.S.-China trade talks will resume when Vice Premier Liu He leads a delegation to Washington later this week.

China's manufacturing activity grew for the first time in four months in March with quicker rises in output and overall new work, according to a private report released yesterday, which also showed the fastest growth in eight months. The Caixin China General Manufacturing Purchasing Managers' Index, which measures the manufacturing sector and is weighted toward private companies, came in at 50.8 in March, rebounding 0.9 percentage points from the previous month, Caixin magazine and research firm Markit said. A reading above 50 signals growth while one below 50 means contraction. The Caixin PMI is a private survey focusing on smaller businesses and offers a first glimpse into the operating environment. It is closely watched as an alternative to the official PMI. The official PMI for March released on Sunday was 50.5, compared with 49.2 in February.

Meanwhile, risk sentiments also bolstered amid signs of progress in US-China trade talks. Beijing said it would continue to suspend additional tariffs on US vehicles and auto parts after April 1 in a goodwill gesture after Washington delayed tariff hikes on Chinese imports. A delegation led by Vice-Premier Liu He will be in Washington this week for another round of talks.

CURRENCY NEWS: China's yuan strengthened against the U.S. dollar on Tuesday. Prior to market opening on Tuesday, the People's Bank of China (PBOC) set the midpoint rate at 6.7161 per dollar, 32 pips or 0.05% firmer than the previous fix of 6.7193.

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