China Market advances on support promise

Mainland China share market finished session modestly above neutral line on Monday, 01 August 2022, as the government promise to support the market helped offset worries about economic growth after slowdown in manufacturing activity growth and concerns over a possible flare-up in Sino-U.S. tension.

At close of trade, the benchmark Shanghai Composite Index was up by 0.21%, or 6.72 points, to 3,259.96. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.97%, or 21.24 points, to 2,202.49. The blue-chip CSI300 index was up 0.45%, or 18.58 points, to 4,188.68.

Market managed to close above boundary line on Monday, after the country's securities regulator chief said stable capital market operations is a top priority, adding the regulator would aim to maintain consistent policy expectations.

However, market gains capped after data showed that China's factory activity actually contracted in July as fresh virus flare-ups weighed on demand. The official National Bureau of Statistics survey showed manufacturing purchasing managers' Index (PMI) fell to 49.0 in July, as China's strict COVID restrictions, prolonged crisis in the property sector and falling global demand slowed production in the country. Another private survey also showed manufacturing expanded at a slower pace last month, as fresh virus flare-ups and a darkening global outlook weighed on demand.

Shares of property developers were down after data showed home sales extended a plunge amid a widening mortgage boycott, while China Evergrande Group failed to unveil a preliminary restructuring plan by the end of July as it had long promised. Investor mood also soured on signs that Beijing is prioritizing the completion of homes for social stability over developers' financial health.

CURRENCY NEWS: China's yuan declined against the U.S. dollar, inline with weaker mid-point fixing by central bank. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 6.7467 per dollar, 0.04% softer than the previous fix of 6.7437. In the spot market, the onshore yuan CNY=CFXS was changing hands at 6.7515 at around late afternoon, 0.12% down from the previous late session close of 6.7433.

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