China stock market: Shanghai, Hong Kong show gains as investors eye crucial trade deal with USA

Chinese stocks pared early gains on Wednesday, while the bond and currency markets barely budged, as traders said the central bank's latest easing measures offered few surprises and doubts persisted over prospects for a U.S.-China trade deal.

The blue-chip CSI 300 Index climbed 0.6 per cent while the Shanghai Composite Index added 0.8 per cent, both pulling back from an earlier advance. Hong Kong's benchmark Hang Seng Index closed flat after rallying more than 2 per cent at the open.

Reaction was muted in bond and currency markets, with investors saying monetary easing was already priced.


China's central bank will lower the benchmark interest rate and inject liquidity into the banking system, among other easing measures, Governor Pan Gongsheng said on Wednesday, to stimulate economic growth and mitigate the impact of a trade war.

The announcements came just hours after U.S. and Chinese officials said U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet China's top economic official He Lifeng in Switzerland this weekend for trade talks.

"The market had been expecting reserve requirement ratio (RRR) and rate cuts since late last year, so there's nothing surprising," said Yu Huiwu, hedge fund manager at Junze Fund Management Co.

"Contact between China and the U.S. on trade is something people expected would happen sooner or later, but a trade deal is not yet in sight."

China's government bond yields showed mixed reactions to the rate decision. One-year bond yield dropped 1.45 bps, while the 10-year yield rose 2 bps.

Prices of China's 30-year treasury futures, which move inversely to yields, fell 0.64 per cent.

"The market has not seen an increase in fiscal stimulus yet," Xiong Yuxiang, strategist at Caitong Securities said, explaining the market's relative calmness. "Easing liquidity is just the first step" toward fresh fiscal policies.

The yuan also slipped against the dollar on Wednesday following the easing measures, after the Chinese currency surged to a six-month high the previous day supported by an unwinding of carry trades and a broader rush out of U.S. assets and back into Asia.

"The recent Asian currencies rally provided the PBOC with a window of opportunity to unleash RMB depreciation pressure," wrote Ken Cheung, analyst at Mizuho Securities.

"In the meantime, the PBOC is not pursuing RMB appreciation, which will in turn add further pressure on the export sector," he said, adding that preserving stability remains Beijing's key policy guidance.

FAQs

Q1. What are key indexes of China stock market?
A1. Blue-chip CSI 300 Index and Shanghai Composite Index.

A2. Who is president of China?
A2. President of China is Xi Jinping.