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  • China Stocks wobble after Phase 1 deal signing
  • January 16,2020  12:27
  • Mainland China equity market finished session lower for third straight session on Thursday, 16 January 2020, as investors digested the signing of a highly anticipated phase one trade agreement between the US and China and awaiting for more signals about economic growth. Around late afternoon, the benchmark Shanghai Composite Index declined 0.51%, or 15.66 points, to 3,074.38. The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 0.11%, or 1.94 points, to 1,812.27. The blue-chip CSI300 index was down 0.44%, or 18.25 points, to 4,148.48.

    The U.S. President Donald Trump and China's chief negotiator, Liu He, signed the “Phase 1” deal before a group of corporate executives and reporters at the White House, marking a truce in the dispute over import tariff which has unsettled markets world-wide and slowed economic growth. The pact eases some sanctions on China. In return, Beijing has agreed to step up its purchases of U.S. farm products and other goods.

    The text of the deal includes promises by the Chinese to increase their purchases of U.S. agricultural, manufacturing, and energy products, along with purchases of services, by more than $200 billion over the next two years, though it also states that “the parties acknowledge that purchases will be made at market prices based on commercial considerations.” It also includes commitments by the Chinese to enforce intellectual property theft laws and a “bilateral evaluation and dispute resolution arrangement” that will encourage the U.S. and China to work jointly to resolves allegations of patent and copyright infringement or intellectual property theft. In exchange, the U.S. slashes tariffs on $120 billion in Chinese goods to 7.5% from 15%.

    With the deal between the world's two largest economies now behind, investors may be casting around for fresh catalysts. China GDP growth figures for 2019, along with key monthly data for December, expected to come on Friday, which will give investors more clues about how the economy is doing.

    China's economy may have expanded by more than 6% last year, Vice-Premier Liu He said after signing the phase one trade agreement with the US in Washington.

    Stocks related to China's railway sector rose after the state planning body approved a massive railway project. China's economic planning body, the National Development and Reform Commission, said in a statement that it has approved an 81.49 billion yuan (US$11.84 billion) railway project from Xining, capital of Qinghai province to Chengdu, capital city of Sichuan province. Transit equipment producer Beijing Dinghan Technology Group (300011 CH) was up close to the daily cap of 10% to 7.5 yuan. Oriental Yuhong (002271 CH), which provides waterproofing system and products for high-speed railway projects, jumped 5.25% to 28.02 yuan and high-speed train accessories provider Guangdong Huatie Tongda High-speed Railway Equipment (000976 CH) climbed 4.12% to 6.06 yuan. Beijing-Shanghai High Speed Railway (601816 CH), the operator of the high-speed rail link between China's two largest cities, soared 40.78% to 6.87 yuan on its debut in Shanghai.

    Shenzhen Desay Battery Technology (000049 CH) climbed by the 10% daily limit to 46.41 yuan, after saying in a preliminary statement that net income probably rose by as much as 30% year on year to 520 million yuan (US$75.5 million) in 2019. The company cited strong sales, smaller losses at a subsidiary and an adjustment of foreign debts for the profit increase in an exchange filing.

    CURRENCY NEWS: The Chinese yuan strengthened against greenback after firmer midpoint fixing by the People's Bank of China and after the United States and China ended some uncertainties for the world economy by signing a partial trade agreement. Prior to market opening, the People's Bank of China (PBOC) lifted its official midpoint CNY=PBOC for the fifth straight day to at 6.8807per dollar, its firmest level since July 26, 2019. The yuan CNY=CFXS firmed 0.12% against the greenback to 6.8820 per dollar.

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