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Stocks tumble as weak yuan sparks fears
Print Edition
Shanghai stocks yesterday posted their biggest drop in more than five months as weakness in the yuan triggered fears of capital flight while the central bank drained more cash from the money market.
The benchmark Shanghai Composite Index plunged 2.04 percent, the biggest daily decline since September 17, to close at 2,034.22 points.
“The continuous decline in the yuan fueled concern over capital outflows,” Shenyin & Wanguo Securities said in a note.
The Chinese currency fell 0.46 percent to 6.1266 against the US dollar yesterday, the lowest in six months, after the People’s Bank of China fixed the midpoint for yuan trading at 6.1184 yuan per dollar, compared with 6.1189 on the previous day.
The yuan fell for a sixth day in a row, signaling the end of a steady appreciation in the currency, analysts said.
Zhu Haibin, chief China economist at JPMorgan Chase & Co, said the yuan’s depreciation was mainly due to weakening economic outlook, policy shift and technical adjustment by market investors.
The liquidity drain by the central bank also dented market sentiment. The PBOC yesterday withdrew 100 billion yuan (US$16.3 billion) from the banking system via 14-day repurchase agreements at a yield of 3.8 percent, adding to last week’s net removal of 108 billion yuan.
“An easing liquidity condition that has been one of the main supporters for the market in the past month is expected to come to an end as the central bank continues to withdraw money,” Guodu Securities said.
Most property shares fell amid worries about credit tightening in the sector. Poly Real Estate, China’s second-largest listed homebuilder, shed 1.5 percent to 6.67 yuan. China Enterprise Co fell 6.2 percent to 6.24 yuan.
Small-cap shares of media and IT firms declined in line with their peers on the Shenzhen market, which saw the ChiNext, a gauge of China’s Nasdaq-style board of growth enterprises, plunge 4.4 percent to 1,472.69.
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