Headline indices of the Mainland China equity market closed mixed on Wednesday, 29 May 2019, on fears of further escalation in the US-China trade war after reports that China is prepared to cut off supplies of rare-earth metals. At closing bell, the benchmark Shanghai Composite Index was up 0.16%, or 4.79 points, to 2,914.70. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.00%, or 0.01 point, to 1,541.66. The blue-chip CSI300 index fell 0.23%, or 8.35 points, to 3,663.91.
Stalled talks in the U. S.-China trade war have soured sentiment for risk assets, with the global economy already showing signs of fragility before the full impact of the most recent tariff hikes kicks in. Investors remained cautious, awaiting new developments between Beijing and Washington amid the ongoing trade tensions.
U. S. President Donald Trump said Monday the U. S. was not ready to strike a deal with China, before adding he expected one in the future. He also said tariffs on Chinese imports could go up substantially.
Beijing is gearing up to use its dominance of rare earths as a counter in its trade battle with Washington, according to in China that included hints from the state planning agency.
A report in Chinese state media that suggested Beijing would restrict exports of rare earth, using the minerals as leverage in the trade dispute, also fanned anxiety. Rare earth is a key component in devices ranging from smartphones and cameras to televisions and any move to restrict their supply would have a devastating impact on manufacturers, with China producing more than 95% of the commodities.
Chinese shipments accounted for 80% of all U. S. imports of rare-earth minerals between 2014 and 2017, according to reports, suggesting that U. S. markets could be in for a major blow if the government carries out plans to restrict business to the U. S. President Trump indicated this week that negotiators are no closer to a deal with China's government over a variety of trade issues, while the Treasury Department is reportedly considering $300 billion in further tariffs targeting imports from China. The Trump administration has accused Chinese negotiators of walking back provisions the two sides had previously agreed upon, an accusation that has stalled the bilateral talks.
CURRENCY NEWS: China yuan softened against greenback on Wednesday, inline with soft mid-point fixing by central bank and amid concerns over China's ability to stabilise both its debt and foreign exchange markets. The PBOC set the midpoint rate at 6.8988 per dollar before the open, weaker than the previous fix of 6.8973. Spot yuan drifted lower for a second consecutive day to 6.9138 per dollar at 0403 GMT, 58 pips softer than the previous late session close and 0.22 percent weaker than the midpoint. It was trading close to lowest point in almost six months, at 6.9217 per dollar, which was breached last Thursday.
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