Chinese stocks rebound as A shares becoming less sensitive to China-US trade dispute

By Xie Jun Source:Global Times Published: 2018/8/7 20:58:39

A shares becoming less sensitive to Sino-US trade dispute: analysts

An investor watches stock prices on a big screen at a local stock trading center in Hangzhou, capital of East China's Zhejiang Province on Tuesday. Photo: VCG

After recent volatility in Chinese equities, stabilizing signs have emerged as policymakers mull actions to boost the financial markets, with A shares rebounding on Tuesday and foreign exchange reserves rising in July.

The rebound would inject some confidence into the Chinese mainland markets, which have been under the shadow of the China-US trade dispute in recent months, analysts said.

They also noted that the government is likely to roll out new fiscal policies in the coming months to boost the country's stock, bond and foreign exchange markets. 

China's foreign reserves stood at $3.12 trillion as of the end of July, up about $5.8 billion compared with the end of June, statistics from the State Administration of Foreign Exchange (SAFE) showed on Tuesday.

A statement from the SAFE noted that China's cross-border capital flows were stable in general in July and that demand and supply were balanced on the whole in the domestic foreign exchange.

Signs of a rebound also emerged on the stock market. On Tuesday, the Shanghai Composite Index gained 2.74 percent to 2,779.37 points, while the Shenzhen Component Index was up 2.98 percent to 8,674 points.

The two markets had slumped in recent weeks, with the Shanghai market falling from a level of 2,903.65 points on July 25, while the Shenzhen market declined from 9,463.76 points on that day.

Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, said that the escalating trade dispute between China and the US has been an important reason for the stock slump, but the dispute has gone on so long that A shares are not as sensitive to the issue as they were two months ago.

He added that with the recent slump of the mainland markets, domestic investors are seeking "bottom-fishing" opportunities.

"I am also considering (buying in now), but I am hesitant because the course of the trade dispute is still not clear," he told the Global Times on Tuesday.

On August 4, US President Donald Trump noted on his personal Twitter account that his tariff policies are working better than expected as China's stock market had dropped by 27 percent in the previous four months.

Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, noted that the market rebound would support investor confidence. He also said that the Tuesday gains might have been triggered by news that the first batch of pension funds were approved by the government on Monday.

The government is also taking measures to stabilize the financial markets. The Shanghai Stock Exchange (SSE) on Monday announced that it had adjusted the trading mechanism to set daily closing prices before the market closes. With the new mechanism, from 2:57 pm to 3 pm, investors won't be able to cancel orders during that period.

The SSE currently adopts a continuous auction trading mechanism and under this system, the closing price is often easily swayed by large-scale orders near the market close.

According to Yang, the government is likely to launch some new fiscal measures in the remainder of the year such as infrastructure investment, which will alleviate the pressure on the domestic stock, bond and foreign exchange markets.

Newspaper headline: Stocks rebound as China mulls stabilizing actions


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