Tuesday, July 23, 2019
Martin Hennecke

State buyers help pare A-share losses
<p>The Hang Seng Index dropped 1.5 percent to 28,122 points while the Shanghai Composite Index slid 0.69 percent to 2,884 points as the tariff war between Washington and Beijing escalated, though losses were contained after conciliatory comments from US President Donald Trump and amid suspected state-backed buying of equities.</p><p>In Hong Kong, Index heavyweight Tencent (0700) fell 2.98 percent to HK$370.6, AIA (1299) was down 2.89 percent to HK$75.7 and HSBC (0005) 0.9 percent lower at HK$66.3 respectively.</p><p>Link REIT (0823) increased 3.81 percent to HK$96.8 as investors are looking for safe haven while experts believe that it will grow to at least HK$100.</p><p>The decline in A-shares was stemmed by &quot;national team&quot; purchases, according to some analysts, referring to state-backed institutions.</p><p>Zhang Qi, analyst at Haitong Securities in Shanghai, said there was &quot;buying of key stocks&quot; by state-backed players, noting relatively high volume in the morning. About 20.8 billion shares changed hands in Shanghai yesterday, not far off the 21.2 billion during Monday&#39;s sell-off.</p><p>&quot;There could have been state buying in early morning trade when there panic selling was evident,&quot; said a second Shanghai-based analyst, who did not want to be identified.</p><p>The yuan meanwhile dropped to 4.5-month low. The mainland Financial Times, owned by The People&#39;s Bank of China, said the yuan may suffer some depreciation in recent time but would not drop much.</p><p>HSBC Economics estimates that the increased tariffs will shave 0.3 to 0.5 percentage points off China&#39;s growth over the next 12 months, referring to the recent increase in tariffs on US$200 billion of Chinese imports. The bank also believed China may cut required reserve ratio or interest rate.</p><p>China International Capital Corporation believes China may cut the corporation tax and the fees of social security fund if US imposed more taxation on China&#39;s imported goods.</p><p>Meanwhile, 26 China A shares will be added to the MSCI China Index, while 30 equities from Saudi Arabia and eight Argentine securities are set to join the MSCI&#39;s emerging-market stocks benchmarks, in steps that could potentially draw billions of dollars of investor inflows.</p><p>Vitasoy International (0345) will be added to the MSCI Hong Kong Index while Hang Lung Group (0010) and Minth Group (0425) will drop out.</p>

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