China Stocks gain on bargain hunting, stimulus hopes

Headline indices of the Mainland China equity market closed higher on Wednesday, 27 March 2019, as investors chased for bottom fishing, following two straight sessions of losses, and hopes for more stimulus after weak industrial profit data. At closing bell, the benchmark Shanghai Composite Index advanced 0.85%, or 25.62 points, to 3,022.72. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.9%, or 14.75 points, to 1,654.59. The blue-chip CSI300 index added 1.16%, or 42.95 points, to 3,743.39.

Consumer staples and health care stocks rallied on defensive buying. Liquor distiller Kweichow Moutai added 2.7% on Wednesday, taking the gauge to just 5.7% shy of its all-time high seen in January 2018. Kweichow Moutai gained 2% to 788.50 yuan and rival Wuliangye Yibin advanced 4.2% to 87.98 yuan. Drug makers also rallied, with Changchun High & New Technology Industry Group surging 7.6% to 306.52 yuan and Shanghai RAAS Blood Products gaining 7.4% to 9.92 yuan.

Shares of lithium battery-related products makers for electric cars slumped after China said it will slash subsidies for new-energy vehicles by as much as 60%. Subsidy cuts for electric cars will range from 47% to 60% depending on the driving range, authorities including the Ministry of Finance said in a statement on Tuesday evening. Contemporary Amperex Technology, China's biggest manufacturer of lithium batteries for new-energy vehicles dropped 2.2% to 83.41 yuan and Beijing Easpring Material Technology, a maker of battery chemicals, slumped 4.3% to 28 yuan. Ganfeng Lithium, a producer of the metal, lost 4.3% to 27.61 yuan.

ECONOMIC NEWS: China's industrial profits tumbled 14% in the January to February period, extending a 1.9% decrease in December, according to data released by the National Bureau of Statistics. Factory-gate prices in automobile, oil refining, steel and chemical all declined in the two month period from a year ago, dropping between 0.4% and 2.5%, dragging on profits of these sectors, the statistics bureau said. The combined decrease in profit shaved the headline profit growth by 14.2%age points, it said. The government releases combined economic data for the months of January and February as the timing of the Lunar New Year holiday shifts every year. Stripping the impact of the Lunar New Year holidays, total profits came in largely the same as last year, said Zhu Hong, an economist with the statistics bureau. China's producer-price index edged up 0.1% in the first two months from a year earlier, official data showed.

CURRENCY NEWS: China's yuan softened against the U.S. dollar on Wednesday, on weaker mid-point fixing by central bank and after data showed the sharpest contraction in China's industrial profits in the January to February period. Prior to market opening, the People's Bank of China set the midpoint rate at 6.7141 per dollar prior to market open, weaker than the previous fix of 6.7042. Spot yuan was trading at 6.7159 at midday, 9 pips weaker than the previous late session close and 0.03% softer than the midpoint.

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