Headline shares of the Mainland China equity market closed virtually flat after fluctuating in and out of the boundary line on Wednesday, 16 January 2019, as a slide in smartphone maker and component suppliers offset gains driven by China's signals for fresh stimulus. At closing bell, the benchmark Shanghai Composite Index edged up 0.00%, or 0.08 point, to 2,570.42. The Shenzhen Composite Index, which tracks stocks on China's second exchange, was marginally up 0.02%, or 0.66 point, to 1,328.65. The blue-chip CSI300 index was edge lower 0.12%, or 1.64 points, to 3,121.52. Despite the slight rally, the benchmark index reached the highest close since Dec. 18, 2018.

Investors risk sentiments were encouraged amid fresh round of stimulus promise including tax cuts from China's top economic planning body and the finance ministry on Tuesday. China's leaders plan to reduce taxes, increase government spending, and provide financing to private and small enterprises in a bid to strengthen the world's second-largest economy. China is enduring its worst slowdown since the global financial crisis, partly because of a punishing tariff dispute with the U.S.

The Chinese government will implement larger tax and fee cuts, especially for small businesses and the manufacturing sector, according to a press conference on Tuesday, 15 January 2019. The press conference was held in Beijing with Zhu Hexin, deputy governor of the People's Bank of China, Xu Hongcai, assistant minister at the Ministry of Finance, and Lian Weiliang, vice chairman of the National Development and Reform Commission (NDRC). The officials were outlining plans for 2019 that were set at an annual policy meeting in December. China will avoid a “flood” of liquidity, and will maintain a stable macro-leverage ratio, the central bank's Zhu said. The central bank will also work more to improve policy transmission and guide funding costs lower, he said. Being prudent doesn't mean the central bank can't tweak monetary policies, Zhu said, adding that China's policy will offer “enough” support to the economy. Zhu also said the People's Bank of China was confident it can keep the value of the yuan steady.

China's new yuan loans in 2018 was increased 2.64 trillion yuan (US$382 billion) from the previous year to 16.17 trillion yuan, according to a statement by the central bank before the press conference, signaling that December lending exceeded most economist estimates. China's loans to small and medium-sized enterprises rose 17.1% in the January-November period over a year ago, according to the central bank statement.

China will take measures to stabilize auto consumption, according to a statement by the NDRC at the press conference. Stabilizing employment is the government's top priority, Lian Weiliang, vice chairman of NDRC said at a press conference. China will speed up investment projects and local government bond issuances, but will not resort to “flood-like” stimulus, Lian said. In the July-September period, China's economic growth sank to a post-crisis low of 6.5% compared with a year earlier. China has lowered the level of reserves that commercial banks need to set aside for the fifth time in a year and has also cut taxes and fees, and stepped up infrastructure investment to shore up the economy.

Property shares rose after new data showed Chinese home prices remained buoyant in December despite tough government curbs.

CURRENCY NEWS: China yuan edged down against greenback on Wednesdy, after central bank set softer mid-point rate. Prior to market opening on Tuesday, the People's Bank of China set the midpoint rate at 6.7615, weaker than the previous fix of 6.7542. The spot yuan was changing hands at 6.7696 per dollar at midday, 86 pips weaker than the previous late session close and 0.12% weaker than the midpoint, after opening at 6.7700.

The onshore renminbi exchange rate, which moves within a trading band of 2% either side of a daily midpoint set by the People's Bank of China, was 0.2% weaker at Rmb6.7738. The offshore rate, not constrained by the same rules, was 0.1% weaker at Rmb6.7806.

China's central bank injected a record 560 billion yuan (US$83 billion) into the markets through reverse repo operations on Wednesday, the largest daily cash injection on record. The move to boost liquidity comes three weeks ahead of the Lunar New Year, when cash demand traditionally surges. The central bank implied on Tuesday it would evaluate whether to cut interest rates after assessing the effect of current policies on shoring up the slowing economy.

OFFSHORE MARKET NEWS: U.S. stocks rose on Tuesday as technology and internet stocks gained on Netflix Inc's plans to raise fees for U.S. subscribers and hopes of more stimulus for China's slowing economy after Chinese authorities indicated they will launch an economic stimulus package to help it through its current rough patch, but those gains were handed back after British MPs rejected Theresa May's Brexit deal by 432 votes to 202, adding more uncertainty about the UK's exit from the European Union. The Dow Jones Industrial Average rose 132.01 points, or 0.55%, to 24,041.85, the S&P 500 gained 24.87 points, or 0.96%, to 2,607.48 and the Nasdaq Composite added 107.07 points, or 1.55%, to 7,012.99.

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