The Mainland China equity market declined for second day in row n Tuesday, 09 July 2019, as investors continued withdrawing their money from the main board to the new tech board listing. Meanwhile, selloff pressure mounted after BlackRock, the world's largest asset manager, downgraded emerging market equities linked to China for the second half of the year (H2CY2019). Around late afternoon, the benchmark Shanghai Composite Index fell 0.5%, or 14.59 points, to 2,918.77. The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 0.3%, or 4.12 points, to 1,550.67. The blue-chip CSI300 index shed 0.55%, or 20.79 points, to 3,782.
Investors continued withdrawing cash from blue chip A-shares to invest in the new tech board listings. The new Nasdaq-like Science and Technology Innovation Board (STAR board) in Shanghai, where shares of some 25 technology companies are expected to begin trading on 22 July 2019, - eight months after President Xi Jinping announced his vision for the board.
The 25 tech-board applicants that have already unveiled offer prices plan to raise about combined 31.1 billion yuan (US$4.52 billion) from IPO sales, or an average 124.4 million yuan each.
Nine Chinese companies, among the first to list on China's Nasdaq-style tech board, announced prices of their new share offer on Tuesday, as investors braced for a busy week for initial public offerings (IPOs). China's securities regulator has given the go-ahead for 25 companies to list on Shanghai's technology and innovation board, the STAR Market, and the first batch of companies will start trading on July 22. Four tech board companies have already completed their offerings, while 21 firms are taking subscriptions from investors this week.
Semiconductor firm AMEC priced its new offering at 29.01 yuan per share, or 170.8 times its 2018 earnings, excluding extraordinary items. In contrast, China Railway Signal & Communication priced its offering at 5.85 yuan($0.8502) per share, or 18.18 times its 2018 earnings, the lowest multiples of the nine firms.
BlackRock, the world's largest asset manager, on Monday downgraded emerging market equities linked to China for the second half of the year, saying markets were “overly optimistic” about China's ability to boost its economic growth amid the trade war with the United States. The firm, which manages more than US$6.5 trillion in assets, said it now sees “trade and geopolitical frictions as the principal driver of the global economy and markets” and expects China's economy to experience “a lull” from the effect of US tariffs. As recently as a month ago, New York-based BlackRock had a positive view of emerging market equities, saying “economic reforms and policy stimulus” could support the stocks.
Investors are cautiously awaiting to slew of economic data ahead to assess health of China's economy. Over the next week, China will publish inflation, money supply, loan and trade data.
Investors are also awaiting for the Fed Chairman Jerome Powell's semiannual testimony to the U.S. Congress on Wednesday and Thursday for more cues on possible rate cuts by the end of July. It is probable that the Fed will now cut rates by 0.25 percentage points instead of the aggressive market anticipation for a 0.5 percentage point cut in July.
Also, some China watchers will also shift their focus to a meeting of the Politburo - a top decision-making body of China's ruling Communist Party - where the current economic situation will be discussed.
CURRENCY NEWS: China yuan was tad higher against greenback on Tuesday. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8853 per dollar, nearly 0.04% firmer than the previous fix of 6.8881. The spot yuan rate was changing hands at 6.8824 per dollar, as against 6.8827 per dollar on Monday