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Shanghai index down 2.04%, biggest fall in five months
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Shanghai stocks posted the biggest slide in more than five months today as investors feared that a weaker yuan may trigger capital flight while the central bank drains cash from the money market.
The benchmark Shanghai Composite Index plunged 2.04 percent, the biggest daily decline since September 17, to 2,034.22. Turnover was 127.8 billion yuan (US$21 billion) at the trading close.
The Chinese yuan weakened 0.48 percent to 6.1280 against the US dollar as of 4pm today, falling six days in a row after the People’s Bank of China set the midpoint for yuan trading at 6.1184 yuan per dollar, slightly lower than 6.1189 yesterday.
Zhu Haibin, chief economist for China at JPMorgan, said the yuan depreciation was mainly due to weakening economic outlook, policy shift and technical adjustment by market investors.
“The continuous decline of yuan fuelled the concern of capital outflows,” said Shenyin & Wanguo Securities.
The central bank today drained 100 billion yuan from the banking system via 14-day repurchase agreements at a yield of 3.8 percent, according to a statement on the bank’s website.
“An easing liquidity condition that has been one of the main supporters for the market in the past month is expected to end as the central bank withdrew cash,” said Guodu Securities.
Most property shares fell as the market worried about credit tightening in the sector. Poly Real Estate, China’s second-largest homebuilder, lost 1.5 percent to 6.67 yuan. China Enterprise Co Ltd sank 6.2 percent to 6.24 yuan.
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