The Chinese stock market continued its upward trend on August 18, following gains from the previous day. Analysts attributed the afternoon buying momentum to easing concerns over liquidity. The Shanghai Composite Index closed up 0.19% at 3,990.30, while the Shenzhen Component Index fell 0.56% to 14,622.50, and the ChiNext Index dropped 0.93% to 3,705.56.
Earlier in the day, the Chinese market showed weakness due to renewed risks in the Middle East. The 60-day ceasefire between the U.S. and Iran ended, and Iran's hardline stance pushed Brent crude oil prices above $91 per barrel, while the yield on 10-year U.S. Treasury bonds rose to 4.72%. Profit-taking from the previous day's gains also contributed to the morning decline.
However, the market gained traction in the afternoon as news emerged that the margin balance for borrowing had increased. According to an analysis by Dongfang Zhiyuan, the margin balance rose by 70 billion yuan in August, indicating a recovery in investor sentiment. Funds viewing the morning dip as a buying opportunity flooded into the market, leading to a successful rebound. The China Securities Journal reported that state-owned high-dividend ETFs rose, along with shares of banks known for their high dividend payouts.
CITIC Securities noted, "The market was generally in an oversold phase earlier this month, and there is a consensus that it has entered a rebound phase. As market liquidity recovers, the oversold phase is expected to transition into a normal equilibrium phase."
Notably, agricultural and seed stocks performed well, with companies like Jin Jian Mi Ye, Nong Fa Zhong Ye, and Wan Xiang De Nong hitting their daily price limits. A report from JP Morgan indicated that geopolitical tensions in the Strait of Hormuz and the occurrence of a super El Niño are expected to drive up fertilizer and grain prices. The global food price inflation rate was recorded at 2.8% in the first half of this year and is projected to rise to 5% in the first half of next year.
Pork-related stocks also saw gains, with Luo Niu Shan and Tian Bang Shi Pin reaching their daily limits. Data from the Ministry of Agriculture and Rural Affairs of China indicated that the average wholesale price of pork rose to 16.03 yuan per kilogram on August 17, a 1.6% increase from the previous Friday. This marked a notable recovery in pork prices, which had been on a downward trend, boosting the stock prices of pig farming companies.
Meanwhile, the People's Bank of China set the yuan's central parity rate against the dollar at 6.7905 yuan, an increase of 0.0032 yuan from the previous day, reflecting a 0.05% rise in the value of the yuan.
* This article has been translated by AI.
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