October 30, 2018 / 7:36 AM / 6 months ago

China shares rise after regulator pledges to enhance liquidity

* Shanghai stocks higher, blue-chip CSI300 index up

* CSRC says will encourage share buybacks, M&A

* Market ‘numb’ to Trump comments - analyst

SHANGHAI, Oct 30 (Reuters) - Shares in China rebounded on Tuesday after securities regulator pledged to enhance market liquidity, but comments from U.S. President Donald Trump that new tariffs on China are “waiting to go if we can’t make a deal” underscored market uncertainty over trade. ** The CSI300 index ended 1.1 percent higher at 3,110.26 points after falling 3 percent on Monday, while the Shanghai Composite Index closed up 1 percent at 2,568.05 points after Monday’s 2.2 percent drop. ** Both indexes reversed early losses that had seen the Shanghai Composite down as much as 0.8 percent and the CSI300 down as much as 0.85 percent. But fragile sentiment also trimmed gains: The Shanghai Composite and CSI300 had risen as much as 1.76 percent and 2.27 percent, respectively. ** China’s securities regulator said Tuesday that it would enhance market liquidity, and encourage share buybacks and mergers and acquisitions by listed firms, the latest in a string of official statements aimed at boosting markets. ** But adding to woes over global trade, the United States is preparing to announce tariffs on all remaining Chinese imports by early December if talks next month between presidents Donald Trump and Xi Jinping fail to ease the trade war, Bloomberg reported on Monday. ** In an interview, Trump said he thinks there will be “a great deal” with China on trade, but warned that he has billions of dollars worth of new tariffs ready to go if a deal isn’t possible. ** “There is no real relationship” between Trump’s most recent comments and Tuesday’s rally, said Cao Xuefeng, an analyst at Huaxi Securities. “At this point the market is numb” to such news, he added. ** “There were two reasons for the early falls: One was the significant weakening of the yuan’s daily midpoint, and the other was the threat of more U.S. tariffs,” said Cao. He said that the statement from the securities regulator and a slight strengthening of the offshore yuan helped to drive the day’s rally. ** The financial sector sub-index ended higher by 2.18 percent, the consumer staples sector closed down 1.81 percent, the real estate index finished up 2.89 percent and the healthcare sub-index fell 1.68 percent. ** The Shanghai SE50 index, an index tracking the 50 most representative sector leaders in Shanghai and dubbed China’s “Nifty 50”, gained 1.09 percent, but some analysts forecast possible weakness ahead. ** “Since September, many indexes representing small and medium-sized enterprises have broken lower, and the Shanghai Composite and SCI have followed them down,” SDIC Essence Futures said in a note. “The SSE50 index still remains rangebound, but considering the bleak economic situation and market sentiment, the likelihood of the SSE50 also breaking lower is significant.” ** The SSE50 is down 15.55 percent for the year, compared to a 22.35 percent drop for the Shanghai Composite. ** Auto manufacturers jumped after a report that China’s top economic planner is proposing a 50 percent cut to car purchase taxes. Shanghai-listed shares of Great Wall Motor Co ended 5.52 percent higher and SAIC Motor Corp Ltd gained 1.22 percent. ** The smaller Shenzhen index ended up 0.94 percent and the start-up board ChiNext Composite index was higher by 0.757 percent. ** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.32 percent, while Japan’s Nikkei index closed up 1.45 percent.

** The yuan was quoted at 6.9688 per U.S. dollar, slightly weaker than the previous close of 6.962. The currency finished its onshore trading session Monday at its weakest level in more than a decade. ** On Tuesday, traders said that they saw major state-owned Chinese banks swapping yuan for dollars in forwards in what they said was likely a move to stockpile dollars for future use in supporting the yuan.

Reporting by Andrew Galbraith; Editing by Rashmi Aich

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