Headline shares of the Mainland China equity market were mixed in lackluster trade on Tuesday, despite hefty gains on Wall Street, as investors sought to lock in profits after sharp gains yesterday on the local market. Risk sentiments were muted after weaker than expected Caixin/Markit manufacturing PMI data. In late afternoon trades, the benchmark Shanghai Composite Index edged up 0.04%, or 1.16 points, to 2,655.96, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.04%, or 0.61 point, to 1,382.16. The blue-chip CSI300 index edged down 0.04%, or 1.14 points, to 3,259.55.
Factory activity grew slightly in November in China, a private survey showed, though new export orders extended their decline in a further blow to the sector. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) for November, released yesterday, ticked up to 50.2 from 50.1 in October. Domestic orders have been losing momentum in recent quarters as the world's second-largest economy slows. Overall, a sub-index measuring new orders did improve slightly to 50.9 in November from 50.4 in the previous month, after manufacturers cut prices. The trade risk was underscored by the sub-index for new export orders shrinking to 47.7 in November from 48.8 a month earlier, amid relatively weak global demand conditions, according to the survey.
A more immediate worry for Chinese manufacturers is weak domestic demand. The Caixin survey showed ebbing client orders weighing on China's factory output, which stalled in November after months of expansion, the survey showed. To counter weaker domestic demand, manufacturers cut prices for the first time in more than a year and a half. But that was not enough to prevent a rise in inventories, the first increase since April. The output prices sub-index fell below the 50-mark to 49.8 in November, boding ill for profit margins. Profit growth at China's industrial firms slowed for a sixth month in October, according to the latest official data. The gauge on overall production fell to 50.0 from 50.1 in the previous month. The downbeat readings backed Friday's official PMI survey for November showing growth in the nation's vast factory sector sliding to over a two-year low. With client demand muted, an effort to contain operating costs led Chinese manufacturers to further reduce staff, while confidence toward the year ahead stayed subdued, according to the survey. The employment sub-index slipped to 48.4 in November from 48.8 in October.
CURRENCY NEWS: China yuan strengthened against greenback on Tuesday, after central bank set stronger mid-point rate, bolstered by an unexpectedly constructive trade dialogue between China and the U.S.. Prior to market opening, the People Bank of China set central parity rate at 6.8939 per US dollar, stronger by 492 basis points from previous day mid-point rate of 6.9431. The appreciation was the largest since June 2017, while the new central parity rate was the strongest since Sept. 28, 2018, data from the system showed. In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2% from the central parity rate each trading day.