Headline indices of the Mainland China equity market closed down after erasing early gains on Thursday, 19 July 2018, as concerns resulting from uncertainty such as a trade war continue to weigh on sentiment. Meanwhile, selloff pressure intensified after China's currency hit lows not seen since last July, and the gap between onshore and offshore rates widened, suggesting greater pessimism among foreign traders. Market losses were, however, limited after reports that China's central bank plans to introduce incentives that will boost the liquidity of commercial banks, helping them expand lending and increase investment in bonds issued by cooperates and other entities. At the close, the benchmark Shanghai Composite Index fell 0.53%, or 14.71 points, to 2,772.55, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 0.8% or 12.53 points, to 1,575.58. The blue-chip CSI300 index sank 0.1%, or 3 points, to 3,428.34.
Airline stocks declined, as the yuan slid to the lowest level in 12 months after the central bank lowered the reference rate amid the intensifying trade spat with the US. The Chinese currency fell as much as 0.5% to 6.7514 against the US dollar in onshore trading on Thursday. A weakening yuan will increase the repatriated values of the Chinese airlines' debts, denominated in foreign currencies. China Southern Airlines slumped 5.3% to 6.81 yuan. Air China sank 5% to 7.37 yuan and China Eastern Airlines also lost 5% to 5.70 yuan.
Focus Media Information Technology jumped by the 10% daily limit to 10.93 yuan after three wholly-owned units of Alibaba Group Holding bought a combined 10.3% of stake in the company for 15 billion yuan.
INDUSTRY NEWS: SOE mergers in coal, telecom, power to gain speed -- The Chinese government plans to promote asset restructuring in sectors like coal, telecommunications, electric power, manufacturing and chemicals this year, as it begins the latest round of its State firms' reform program. Regulators would continue to promote the “concentration of State-owned capital” in major strategic industries, resolve excess capacity and set up a special fund aimed at optimizing and integrating government-owned coal assets.
EU acts over Chinese electric bikes - The European Union will impose duties from Thursday, 19 July 2018, on Chinese electric bicycles in a move to curb cheap imports that European producers say are flooding the market.The duties are the latest in a series of EU measures against Chinese exports ranging from solar panels to steel, which have sparked strong words from Beijing. h is carrying out an investigation on behalf of the 28 EU members, decided that tariffs of between 27.5 and 83.6% should apply for all e-bikes coming from China. The Commission found Chinese exports of e-bikes to the EU more than tripled from 2014 to the 12 month period to September 2017. Their market share rose to 35%, while average prices fell 11%.
CURRENCY NEWS: The Chinese yuan was down against the dollar on Thursday, as the People's Bank of China set softer mid-point rate and as the Federal Reserve Chairman Jerome Powell gave an upbeat outlook for the US economy and reinforced views that the Fed was on track to steadily hike interest rates. The yuan has been hurt by a worsening trade conflict between the U.S. and China, and expectations that Beijing will ease monetary policy, while the Federal Reserve is likely to keep raising U.S. borrowing costs. The People's Bank of China (PBOC) set the Yuan reference rate at 6.7066 vs. the previous day's fix of 6.6914. The Chinese yuan rose 0.1% to 6.7392 per dollar in offshore trading after falling to a nearly one-year low of 6.7580 the previous day.
OFFSHORE MARKET NEWS: US stock market closed modest higher on Wednesday, supported by the Powell reiterating that the U.S. economy was healthy, even though he warned that rising world protectionism would over time pose a risk to the global economic expansion. The S&P 500 index rose 6.07 points, or 0.2%, to 2,815.62. The Dow Jones Industrial Average added 79.40 points, or 0.3%, to 25,199.29. The Nasdaq composite fell 0.67 points to 7,854.44.
The major European markets also ended higher on Wednesday. The STOXX600 index lifted by 0.6%, the German DAX index rose by 0.8% and the UK FTSE index rose by 0.7%.
COMMODITY NEWS: Crude oil futures rebounded to settle modestly higher on Wednesday, extending gains to a second successive session. According to the EIA, US crude inventories rose by 5.8 million barrels last week as oil production reached a record 11 million barrels per day. But a drone attack at a Saudi Aramco refinery in Riyadh by Yemen's Houthis supported prices. There were also reports that OPEC compliance with output curbs fell by 27% to 147% in May. Brent crude rose by US74 cents or 1.0% to US$72.90 a barrel. WTI oil for August delivery ended up $0.68 or 1% at $68.76 a barrel on the New York Mercantile Exchange.
Base metal prices were mixed on the London Metal Exchange (LME) on Wednesday. Zinc rose by the most in 12 months, up by 3.8% on speculation that China is taking steps to bolster bank lending. But aluminium was down by 0.6%.
The gold futures price rose by US60 cents an ounce or 0.05% to $1,227.90 an ounce. The spot gold price was trading near US$1,227 an ounce in late US trade.