China stocks edge up after marginal lending rate cut; Hong Kong flat

China stocks edged up on Friday after Beijing lowered a key lending rate to support a slowing economy hit by the protracted trade dispute with the United States. The CSI300 index rose 0.2%, to 3,933.47 points at the end of the morning session, while the Shanghai Composite Index gained 0.2%, to 3,004.48 points. However, both the indexes were set for weekly losses.

China marginally cut its new one-year benchmark lending rate for the second month in a row on Friday, as the central bank seeks to guide borrowing costs lower amid the Sino-U.S. trade war. The largely-expected reduction in the one-year Loan Prime Rate (LPR), now at 4.20%, came after the People's Bank of China (PBOC) lowered banks' reserve requirements on Monday. It also comes shortly after the Federal Reserve cut U.S. interest rates by 25 basis points.

Iris Pang, Greater China economist for ING in Hong Kong, said the move "is not a growth-stimulation story, it is more of a protection story, to not fall into a weaker growth range. Growth has been very weak and this is more for lowering interest costs for production and infrastructure." The widely anticipated cut came after China maintained a key 1-year money market rate unchanged, indicating Beijing's reluctance to flood the banking system with excessive liquidity.

Investors also eyed Sino-U.S. trade talks, though analysts expect a limited impact from it on the A-share market ahead of the 70th anniversary of the founding of China due to Beijing's inclination to maintain stability in financial markets ahead of such significant events. Helping underpin the market were robust continued foreign funds, which marked their 16th session of net inflows into A-share market via the Stock Connect linking Hong Kong and the mainland, according to Refinitiv data. ** It's natural for global investors to have proper exposure to equities in China as Beijing further opens up its financial markets, Yan Kaiwen, an analyst with China Fortune Securities said.

In Hong Kong, stocks were flat after a four-day losing streak. The Hang Seng index was unchanged at 26,477.11 points, while the Hong Kong China Enterprises Index was unchanged at 10,383.34 points. Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.17% while Japan's Nikkei index was up 0.34%. The yuan was quoted at 7.0868 per U.S. dollar, 0.14% firmer than the previous close of 7.097. As of 04:18 GMT, China's A-shares were trading at a premium of 29.99% over the Hong Kong-listed H-shares.

Also Read: UPDATE 1-China, U.S. to hold trade talks in October - China commerce ministry

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