China shares jump as Sino-U.S. trade talks 'back on track'

Want Want China Holdings

01/07/2019 05:43

* SSEC up 1.88%, CSI300 climbs 2.47%
    * Trading volume surges as uncertainty eases
    * Huawei suppliers lead gains as Trump offers olive branch
    * Rare earth firms slump
    * Trade relief may be temporary-analysts

    SHANGHAI, July 1 (Reuters) - Chinese shares jumped in heavy
trade on Monday after the United States and China agreed to
restart trade negotiations and Washington said it would postpone
further tariffs, offering investors hope of a resolution to the
increasingly damaging trade war.
    While there were no signs of progress on key sticking points
in the trade dispute, the promise of more talks and concessions
offered by U.S. President Donald Trump, including an easing of
restrictions on tech company Huawei, lifted the blue-chip CSI300
index  .CSI300  2.47% higher.
    The benchmark Shanghai Composite index gained 1.88% to
3,034.80 points, despite fresh signs of domestic economic
weakness in factory activity surveys.
    The smaller Shenzhen index  .SZSC  was up 2.93% by midday
and the start-up board ChiNext Composite index  .CNT  jumped
3.2%. Hong Kong markets were closed for a holiday.
    Volumes surged as investor uncertainty over trade eased.
About 15.59 billion shares have traded so far on the Shanghai
exchange, roughly 74.9% of the market's 30-day moving average of
20.82 billion shares a day, and compared with 18.14 billion
shares for the full trading day on Friday.    
    "The external risks that have been troubling markets for a
long time have been temporarily resolved, and A-shares welcome
restored risk appetite," Yang Liu, an analyst at Minsheng
Securities, said in a note.
    After meeting with Chinese President Xi Jinping in Osaka on
Saturday, Trump said China had agreed to make unspecified new
purchases of U.S. farm products and return to the negotiating
table.
    But while Trump said the talks are "back on track", existing
tariffs remain in place and the meeting produced no deadline for
progress on a deal.  urn:newsml:reuters.com:*:nL4N2400C0
    Information technology firms led the gains, with suppliers
to Huawei Technologies Co  HWT.UL  surging after Trump said the
U.S. Commerce Department would study in the next few days
whether to take Huawei off the list of firms banned from buying
components and technology from U.S. companies without government
approval.  urn:newsml:reuters.com:*:nL4N23O1L1
    A sub-index tracking IT firms  .CSIINT  jumped 4.90% and one
tracking telecoms companies  .CSI000994  added 3.89%.
    Rare earth producers slumped after rallying in recent weeks
as trade war tensions intensified.
    Xi had visited a rare earth firm in southern China in May,
fuelling speculation that China could cut off supplies of the
metals, a key ingredient in high-technology consumer electronics
and military equipment, to the United States as part of the
trade war.
    JL MAG Rare-Earth Co Ltd  300748.SZ , which hosted Xi in
May, fell 3.91%. 
    Broader market gains came despite further signs of weakness
in China's manufacturing sector, with both private and official
activity surveys pointing to contraction last month.
    On Monday, the Caixin/Markit Manufacturing Purchasing
Managers' Index (PMI) for June came in at 49.4, its worst level
since January and below expectations.  urn:newsml:reuters.com:*:nS7N1DB01H
    That followed a worse-than-expected reading in the country's
official manufacturing survey, released on Sunday. urn:newsml:reuters.com:*:nL4N1AF2LW
          "The latest survey data suggest that China’s economy
is coming under renewed pressure as a result of cooling foreign
demand and waning fiscal support, which should trigger further
monetary easing," Capital Economics said in a note.
    China's yuan also gained on the trade ceasefire, with spot
yuan  CNY=CFXS  quoted at 6.839 per U.S. dollar, 0.38% firmer
than the previous close of 6.865. 

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 (Reporting by Andrew Galbraith; Editing by Kim Coghill)
 ((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging:
andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))