The Shenzhen index was unable to gain any support from global trends and, with concerns over increased market supply, caution ahead of Trump’s press conference triggered market losses.
There were no significant positive developments in international markets with US equities ending unchanged on the day amid underlying uncertainty.
The People’s Bank of China (PBOC) fixed the yuan almost unchanged on Wednesday, while there were no major moves in the spot market as the PBOC looked to curb volatility.
There has been an increase in planned Initial Public Offerings (IPOs) over the past week, which has tended to undermine market support, with concerns that there will be a significant increase in market supply, which would tend to undermine prices as underlying liquidity support declines.
There was underlying caution ahead of the lunar New Year holidays with a reluctance to commit funds to equity markets.
The Shenzhen index was little changed at the open and a rally in early trading halted short of the 2,000 level with selling resuming into the session break. Although the market stabilised following the break, there was fresh selling late in the session with a slide to daily lows.
At the close, there was a decline of 20.86 points and 1.05% at 1,968.43 and the lowest close of 2017 with volumes slightly lower than seen on Tuesday.
The content of US President-elect Trump’s press conference will be monitored very closely with a particular focus on any comments surrounding policies towards China and the potential for the country to be named as a market manipulator. A tough stance from Trump would tend to put downward pressure on equities, while a more conciliatory tone would offer relief.
Shenzhen Composite Daily Chart