China Market gains as tech-share rally eases monetary policy concerns

Headline indices of the Mainland China equity market closed higher for the first time in last three session after recouping early losses on Wednesday, 24 April 2019, as fresh large-scale liquidity pumps into the financial system. Market gains were however limited amid concerns that the central bank could scale back the scope of further policy easing. At closing bell, the benchmark Shanghai Composite Index inclined 0.09%, or 3.02 points, to 3,201.61. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 1.1%, or 19.02 points, to 1,747.88. The blue-chip CSI300 index grew 0.28%, or 11.08 points, to 4,030.09.

The People's Bank of China injected 267.4 billion yuan funds to select commercial banks via its targeted medium-term lending facility (TMLF) on Wednesday as it looks to provide struggling smaller business with a steady stream of affordable financing. The move reinforced views PBOC is now leaning more on targeted tools to direct funding to parts of the economy that are still struggling, rather than more sweeping system-wide cash infusions measures - such as reserve ratio cuts - used over the past year when there were worries of a sharper slowdown in the world's second-largest economy. Expectations of further stimulus in China have shifted markedly since the release of better-than-expected first-quarter GDP and March economic data last week, which suggested the economy may be starting to steady after a flurry of earlier growth-boosting measures.

 

Meanwhile, investors ignored fresh progress of the Sino-U.S. talks, with likelihood of a deal largely priced in U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for trade talks beginning on April 30, the White House said in a statement on Tuesday.

Tech-related shares rallied. Interest in tech shares appeared to be ignited by news that several Chinese fund managers won regulatory approval to raise money for new funds targeting Shanghai's Nasdaq-style technology board. Beijing E-Hualu Information Tech (300212 CH) rose 6.1%, after the intelligent transportation system technology provider reported a 92.5% year-on-year increase in net profit attributable to shareholders, at 77.21 million yuan.

Shares of energy companies were up as crude oil prices shot up to a six month high on Monday after the US said it would no longer give sanction waivers to buyers of Iranian oil. Meidu Energy (600175 CH), Hunan New Energy (600478) and Shaanxi Yanchang Petroleum (600248 CH) hit the 10% daily limit.

Chicken-related stocks continued to rally, as industry observers say the poultry farming industry will benefit from higher pork prices tied to the outbreak of African swine flu. Shandong Xiantian (002746 CH) was up 6%, while Wens Foodstuff (300498 CH) gained 3%. Guangdong Guanghong Holdings (000529 CH) gained 2.5%.

Zhejiang Huahai Pharmaceutical falls fell as much as 4%, after it was named among 40 defendants in a class-action suit in the US for producing the drug valsartan. The medicine, used for treating heart ailments and high blood pressure, was recalled last July globally after traces of the carcinogen NDMA were found. Huahai's shares have retreated by 45% since the global recall last year.

CURRENCY NEWS: China's yuan was up changed against the U.S. dollar on Wednesday, as firm mid-point fixing by central bank. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7205 per dollar, weaker than the previous fix of 6.7082. Spot yuan traded at 6.7242 at midday, 36 pips stronger than the previous late session close and 0.06% softer than the midpoint.

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