Thursday, 18 October, 2018

China's Sept new loans seen rising as policymakers seek to underpin growth

China Pumps $109 Billion Into Economy Amid Trade War With US Behemoth oil stock the lone hero as China’s stocks rebound
Sherri Watson | 10 October, 2018, 17:43

China is reluctant to ease policy via a policy rate cut to avoid fuelling any increase in leverage and therefore continues to embark on targeted easing in the form of RRR cuts.

"The export tax rebate is the most effective way to counter the negative impact of trade war on Chinese exporters to stabilize the job market".

China's foreign-currency holdings fell in September, as heightened trade tensions with the USA fueled concerns of capital outflow and further yuan depreciation.

Washington and Beijing have imposed punitive tariffs of up to 25 percent on billions of dollars of each other's goods in an escalating fight over US complaints China steals or pressures companies to hand over technology.

The three core stock indexes on the mainland, the Shanghai Composite, Shenzhen Component and Growth Enterprise Market benchmarks declined 3.72 percent, 4.05 percent and 4.09 percent.

Lenovo was 1.6 percent lower in Hong Kong on Monday, and ZTE fell 2.5 percent.

On Monday, Hong Kong's Hang Seng index was down 0.5 percent and a sub-index tracking information technology firms was 0.9 percent lower.

Telecoms equipment maker ZTE led tech shares downward on Monday, falling 8.14% to 16.81 yuan after a Bloomberg News report last week said China had inserted special microchips into computer goods exported to the USA to steal technology secrets.

China also has to contend with a stock market that has fallen by around 15 percent this year and a currency that has lost 10 percent of its value against the dollar. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 92.76, weaker than the previous day's 92.87.

U.S. and Chinese naval ships had a close encounter at sea, and speculation that the USA could further hike interest rates rattled emerging markets.

Investors are also keeping an eye on Brazil after right-wing Congressman Jair Bolsonaro won almost half the votes in Brazil's first-round presidential election on Sunday, marking a major shift to the right in Latin America's largest nation fuelled by voters' anger at corruption. That prompted suggestions Beijing might weaken the currency to help exporters that face punitive USA tariffs of up to 25 percent.

The move has resulted in an increased weakening of China's currency, which has been down nearly 6% against the dollar this year and, following the news, on Monday the Chinese currency slipped to 0.4% versus the dollar.

The losses in NY seeped into Asia, where Shanghai sank 2.4 percent and Hong Kong lost 0.8 percent with property firms hit by expectations the city's banks will lift mortgage rates again as they track a likely Fed hike. Brent crude fell 0.9 percent to $83.38 per barrel. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan 6.8697 0.01% * Offshore 6.9523 -1.37% non-deliverable forwards **Premium for offshore spot over onshore **Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint.