Shanghai stocks edge lower as investors pocket profit after recent gains

Stocks in Shanghai edged lower as investors took profit after the recent gains triggered by optimism around a possible trade deal between China and the United States. At midday, the Shanghai Composite Index fell 0.2 percent to 2,751.45 points, while the blue-chip CSI300 was flat. CSI300's financial sector sub-index gained 0.5 percent, the consumer staples sector lost 0.9 percent, while energy shares gained 0.2 percent. The smaller Shenzhen index edged down 0.4 percent while the start-up board ChiNext Composite index lost 0.8 percent.

While Shanghai stocks pared gains from previous sessions, trading volume rose on Tuesday to 28.5 billion shares, up from 26 billion on Monday. That is a sign of further gains to come for the market, Wei Yi, an analyst at Kaiyuan Securities, wrote in a note on Wednesday. "It illustrates that (while) there are people leaving the market, there are (also) people entering," said Yi. The analyst added that the Shanghai index was expected to adjust after breaching a high of 2,780 points on Tuesday, noting that investors are "not psychologically prepared" for another round of sudden rise. Beijing and Washington started a new round of talks on Tuesday with sessions at a higher level later in the week.

U.S. tariffs on $200 billion in imports from China are set to rise to 25 percent from 10 percent if no deal is reached by March 1. On Tuesday, U.S. President Donald Trump again suggested that he was open to pushing off the deadline to complete negotiations, saying March 1 was not a "magical" date. Investors expect a deal to be reached next month. Shares in China's agricultural companies jumped after the Chinese government said it will deepen reforms of the sector to promote its rural economy, the government said in its first policy statement of 2019. In Hong Kong, the Hang Seng Index rose 0.7 percent to 28,415.58 points, while the Hang Seng China Enterprises Index climbed 0.8 percent.

The offshore yuan hit a two-week high overnight and the onshore yuan was quoted at 6.7244 per U.S. dollar around midday, 0.5 percent stronger from the previous close, after a Bloomberg report on Tuesday suggested that the United States is seeking to secure a pledge from China that it will not devalue its yuan as part of an agreement to end the trade war. Around the region, MSCI's Asia ex-Japan stock index was up 0.7 percent while Japan's Nikkei index gained 0.4 percent. As of midday, China's A-shares were trading at a premium of 18.42 percent over the Hong Kong-listed H-shares.

(With inputs from agencies.)