Headline indices of the Mainland China equity market spurted on Monday, 19 August 2019, as risk sentiments underpinned after a move by People Bank of China (PBOC) to change the way a key interest rate benchmark is set. Meanwhile, sentiments were further boosted up after Chinese government on Sunday announcement a plan to transform Shenzhen, which neighbors Hong Kong, into a global businesses hub and a signal from US president Donald Trump that there is progress toward a trade deal. At losing bell, the benchmark Shanghai Composite Index advanced 2.1%, or 59.27 points, to 2,883.10. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 3.05%, or 46.49 points, to 1,571.97. The blue-chip CSI300 index grew 2.17%, or 80.55 points, to 3,791.09.
The People's Bank of China (PBOC) on Saturday unveiled key interest rate reforms to help steer borrowing costs lower for companies and support a slowing economy caught in the grip of a bruising trade war with the United States.
Investors were also encouraged by the potential for improvement in US-China trade relations after White House chief economic adviser Larry Kudlow said that if talks between deputies from Beijing and Washington went well and we can have a substantive renewal of negotiations then we are planning to have China come to the USA and meet with our principals to continue the negotiations. He added that high-level phone talks last week were a lot more positive than has been reported. Trump provided further cause for hope by tweeting: We are doing very well with China, and talking. Kudlow also raised the prospect of using cash taken from higher tariffs on Chinese goods to pay for tax cuts.
Shenzhen-related stocks skyrocketed after Beijing unveiled a reform plan to make the city a model for other Chinese cities. The technology hub in the southern province of Guangdong would become a model of “high-quality development, an example of law and order and civilisation, as well as societal satisfaction and sustainability.” By 2035, the city will be competitive in the world by its comprehensive economic abilities. By the middle of the century, it will become a global “benchmark” for competitiveness, innovation and influence.
CURRENCY NEWS: The yuan wavered against greenback on Monday, on caution ahead of the debut of China's new benchmark lending rate on Tuesday, which was announced at the weekend. People's Bank of China will announce the new loan prime rate, or LPR, at 9:30 am on the 20th of every month. Commercial lenders will be required to set the price for new loans to businesses and households mainly with reference to the LPR. Spot yuan traded at 7.0447 per dollar, pretty much unchanged from the last session close and 0.12 percent away weaker than the midpoint, which was set by the People's Bank of China at 7.0365.