China Stocks fall on GDP data

Headline indices of the Mainland China equity market tumbled on Tuesday, 17 July 2018, as risk aversion selloff continued broad-based after Beijing reported slightly softer economic growth data. The economy grew 6.7% in the second quarter from a year earlier, slightly slower than the first quarter, as Beijings crackdown on debt risks crimped activity, while June factory output growth weakened to a two-year low. Around late afternoon, the benchmark Shanghai Composite Index fell 1%, or 28.30 points, to 2,785.75, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, sank 0.9% or 14 points, to 1,588.88. The blue-chip CSI300 index shed 1.1%, or 37.43 points, to 3,434.66.

Amid trade tensions, Chinese mainland stocks are down almost 30% since their peak in January. On July 6, U.S. President Donald Trump's administration officially instituted 25% duties on $34 billion worth of Chinese goods. China, for its part, swiftly responded by implementing retaliatory tariffs on the U.S. shortly afterward. The following week, the U.S. released a list of Chinese goods with an annual trade value of about $200 billion that may be subjected to 10% tariffs.

ECONOMIC NEWS: China's GDP growth slows to 6.7pc -- China's economy grew 6.7% in the second quarter of 2018 from a year earlier, slowing marginally from 6.8% growth in the previous three quarters, the National Bureau of Statistics data showed yesterday, expanding at a slower pace as Beijing's efforts to contain debt hurt activity. The National Bureau of Statistics data also showed that China's industrial output grew 6.0% in June from a year earlier, while fixed-asset investment growth slowed to 6% in the first half of the year as the trade war with the United States intensified.

Property market losing steam in China -- China's property investment posted its weakest growth in six months in June as developers faced fresh curbs and tighter funding conditions, with sales also slowing, in a sign one of the economy's key drivers was losing steam. Growth in real estate investment, which mainly focuses on residential but also includes commercial and office space, cooled to 8.4% in June year-on-year, compared with a 9.8% rise in May, according to the data released by the National Bureau of Statistics (NBS) yesterday. It was the slowest pace of growth since December 2017.

China's housing ministry said last week it would restrict subsidies to cities with hot property markets for new projects to tear down and redevelop shantytowns, which had led to a buying frenzy, especially in smaller cities. Developers also face a tougher funding environment as China looks to rein in excessive debt financing overseas.

Daily steel output hits record high -- Daily crude steel output in China hit a fresh record in June, even as the government ordered a series of environmental inspections at steel mills across the country. Steel mills produced 80.2 million tons of crude steel last month, according to data from the National Bureau of Statistics. This was down 1.1% from May's record 81.13 million tons, but June has one less day. For the first half of the year, China's steel output of 451.16 million tons rose 6% from 419.75 million tons in same period last year.

Aluminum production increases as smelters ramp up -- The country's aluminum output in June rose 1.6% from the previous month to 2.83 million tons, data from the National Bureau of Statistics (NBS) showed yesterday, as a gradual ramp-up of new smelting capacity raised production. In the first six months of the year, China produced 16.47 million tons of aluminum, a rise of 1.6% from the same period last year, the NBS data showed.

CURRENCY NEWS: The Chinese yuan was up against the dollar on Tuesday, due to the People's Bank of China stronger mid-point rate fixing. The central parity rate of the Chinese currency renminbi, or the yuan, weakened 31 basis points to 6.6758 against the U.S. dollar Monday, according to the China Foreign Exchange Trade System.

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