China stock market

China stocks rise for first time in three days after Beijing signals no increase in employers’ social security costs

PUBLISHED : Friday, 07 September, 2018, 5:41pm
UPDATED : Friday, 07 September, 2018, 5:41pm

Chinese stocks rose for the first time in three days on Friday, with reassurances by China’s State Council that the collection of social security taxes would remain unchanged countering the prospect of new US tariffs on exports from the world’s second-largest economy.

The benchmark Shanghai Composite Index gained 0.4 per cent at the close, trimming the week’s losses to 0.8 per cent. In Hong Kong, the Hang Seng Index finished almost unchanged, but a further 1.7 per cent decline will drag the gauge into bear market territory.

While the Trump Administration might announce tariffs on another US$200 billion worth of Chinese imports as early as Friday after a public comment period on the proposal concludes, China’s State Council quelled speculation about the implementation of stricter collections, which would increase the contributions made by employers. At a meeting on Thursday chaired by Premier Li Keqiang, the cabinet said it would study a plan to lower the payment ratio of social security insurance and unveil favourable tax policies for funds investing in start-ups.

“That is a kind of countermeasure rolled out by the government before the tariff announcement,” said Wei Wei, a trader with Huaxi Securities in Shanghai. “But investors still remain cautious and have their eyes on the US, to see if the tariff will proceed.”

A report by Nomura Holdings said a more strict collection of social security taxes would cut corporate profits by 2.5 per cent and chip 0.6 percentage points from China’s normal economic growth. It would also outweigh the benefits of raising the threshold for taxing individual incomes that was passed by the legislature at the end of last month, according to the report.

The Shanghai Composite Index added 10.71 points to 2,702.30 on Friday. The CSI 300 Index of big caps advanced by 0.5 per cent and the ChiNext index of smaller companies closed 0.2 per cent higher.

Energy producers and health care companies were among the top gainers. Shaanxi Coal Industry jumped by the 10 per cent daily limit to 8.05 yuan and China Shenhua Energy rallied by 4.8 per cent to 18.89 yuan, on expectations that coal prices will rise amid strained supply. Lepu Medical Technology Beijing added 6.5 per cent to 33.96 yuan and Tasly Pharmaceutical Group gained 3.6 per cent to 22.95 yuan.

Technology stocks bucked the trend and slumped following a sell-off in Asia and the United States, on concerns about the waning demand for semiconductors. Dawning Information Industry, a maker of chips for servers, sank by 8.3 per cent to 48.74 yuan. Integrated circuit maker Taiji Computer tumbled by 7.5 per cent to 31.99 yuan.

In Hong Kong, the Hang Seng Index slipped by 1.35 points to 26,973.47. The Hang Seng China Enterprises Index, or the H-share gauge, lost 0.2 per cent.

Macau casino operators topped the list of the day’s worst performers in the city. Galaxy Entertainment Group shed 3.8 per cent to HK$52 and Sands China fell by 3.2 per cent to HK$34.55.