China stocks edge higher as other Asia bourses slip


Tuesday 03:00 BST

What you need to know

  • Asian equities remain on back foot
  • Chinese stocks edge up after initial dip
  • European uncertainty weighs on sentiment
  • Currencies and government bonds steady after choppy session

Hot topic

Asia-Pacific stocks were on the back foot after uncertainty swept through global markets on Monday.

In Tokyo, the Topix was off 1.7 per cent and in Sydney, the S&P/ASX 200 was down 1 per cent, with all segments for both benchmarks in negative territory.

China-focused shares fared slightly better in early trading after tumbling on domestic bourses on Monday. The CSI 300 index of major Shanghai- and Shenzhen-listed stocks was up 0.1 per cent, after a dip, while the Hang Seng China Enterprises index of major Chinese companies listed in Hong Kong added 0.5 per cent. Hong Kong’s broader Hang Seng index edged up 0.1 per cent.

The moves came after the CSI 300 had its worst day since February on Monday, sliding 4.3 per cent despite the People’s Bank of China moving over the weekend to inject more cash into the banking system to shore up economic growth.

However, ANZ analysts cited a range of drivers contributing to rising volatility, including Italy’s fiscal problems, a surge in US bond yields hitting equities, negative sentiment damping Chinese markets and an unclear outlook for Brexit.

“Uncertainty in markets is broad-based at the moment,” they said.

JPMorgan Asset Management strategist Chaoping Zhu said that the PBoC’s latest move came against “a backdrop of softening growth momentum and weakening confidence” and warned that the impact from the stimulus was “questionable”.

Forex

The US dollar index, measuring the greenback against a basket of peers, was steady at 95.76. The Japanese yen was up 0.2 per cent at ¥112.99 after climbing from ¥113.70 on Monday.

China’s onshore renminbi exchange rate, which moves within a trading band of 2 per cent either side of a daily midpoint set by the central bank, was up 0.1 per cent at Rmb6.9243 per dollar. The offshore rate was 0.2 per cent weaker at Rmb6.93.

The “policy loosening in China is of course in contrast to the monetary tightening in the US and will fuel the debate if [dollar/renminbi] is destined for a move to Rmb7.00”, said Société Générale analysts.

The Australian dollar was 0.1 per cent higher against the US currency at $0.7081.

Fixed income

Sovereign debt markets were calmer following a bumpy session in Europe. The yield on US 10-year Treasuries was up 1 basis point at 3.24 per cent while that on the equivalent Australian note was down 1bp at 2.756 per cent. The 10-year Japanese government bond yield was unmoved at 0.145 per cent.

Commodities

Oil prices were basically unchanged with Brent crude hovering just shy of $84 a barrel while West Texas Intermediate was at $74.33 a barrel.

ANZ analysts said that “oil prices have been rising, due to concerns about a severe shortage from looming Iranian sanctions and reduced supply from Libya and Venezuela . . . [but] Saudi Arabia has said that it will fill the lost barrels from Iran”. A late price bump on Monday suggested that “most of the effect of US sanctions has already been priced in”, ANZ added.

The price of gold was 0.2 per cent higher at $1,189.40 an ounce.

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