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August 5, 2020

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Markets mixed amid volatile trading after gains

Chinese markets closed mixed yesterday, with many sectors losing ground in volatile trading after gaining on Monday.

The benchmark Shanghai Composite Index inched higher in the afternoon session to close up 0.11 percent at 3,371.69 points. The smaller Shenzhen Component Index dipped 0.75 percent to finish at 13,860.46, while the ChiNext Index fell 1.26 percent to 2,832.84 points.

Volume on the two main bourses was 1.37 trillion yuan (US$196 billion), compared with 1.33 trillion yuan in the previous session.

Most sectors fell, with leisure services, electronics and trade firms dragging down the broader market. The national defense sector was one of the worst performers, after being Monday’s top gainer.

Heavyweight banking shares performed strongly.

Zheng Hong, chief investment adviser at LC Securities, told Caixin that the banking sector is at the bottom of historical valuations. She expects banks’ fully set-aside provisions for bad loans in the first half of the year will boost their results in the coming months.

Liquidity in August will remain relatively stable from July and there will be little change in the cost of funds, UBS Securities China Rates Market analyst Mary Xia said.

She said the People’s Bank of China’s liquidity operations last month were cautious and the Central Bank needs to keep liquidity stable in the second half to create a good environment for credit growth.

“Costs of funds are unlikely to rise further as they are currently close to policy rates,” Xia said.

“On the other hand, they are unlikely to return to the low level of the first half and might fluctuate around policy rates.”


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