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Chinese stocks rallied on Monday for a $ 1.7 trillion sale and the currency slid to its lowest level in six months, as investors prepare for the next round in a trade dispute with the United States.
The Shanghai Composite Index closed near its lows of the day, down 1.1%. The yuan slid up 0.72 percent to 6.5416 for a dollar, its lowest since December 28, while the offshore exchange rate fell for an eighth day.
A series of negative factors – of the trade war with the United States at the risk of a the credit crisis – has weighed on Chinese financial markets in recent weeks. The Shanghai stock index is on After falling nearly 20% from its recent peak, the speed of the descent of the yuan worried analysts. Equity investors swept aside a much-needed reserve ratio cut by the central bank.
"The weakness of the yuan is quite negative for the whole sentiment," said Castor Pang, director of research at Core-Pacific Yamaichi Hong Kong. "The fear of the trade war is the main reason for the current weakness of the stock market."
The Treasury Department plans to intensify the examination of Chinese investments in sensitive industries of the United States under an emergency law. According to the plan, the White House would use one of the most significant legal measures to declare that China's investments in US companies involved in technologies such as new energy vehicles, robotics and the like. aerospace pose a threat to economic and national security, according to eight people familiar with the plans.
Air China Ltd. and China Eastern Airlines Corp. have sunk into the daily limit of 10% due to the fear of a weaker yuan and rising fuel prices. Industrial and Commercial Bank of China Ltd. plummeted the most in two months. Unlike previous RRR cuts, the money released for the country's five largest public banks and 12 commercial equity lenders will be used for debt-to-equity conversions.
Hong Kong's Hang Seng index fell 1.4% to 3:19 pm. local time, heading to its lowest close since December 15, while Macau casinos and Chinese developers collapsed.
The yuan was traded 0.6% to 6.5353, extending its decline this month to 2%, while the offshore currency was ready for its longest run of losses since October 2016.
"The yuan is facing a double heartbreak – escalating trade tensions are hurting sentiment and softer monetary policy is also putting pressure on the currency," said Gao Qi, currency strategist at Scotiabank in Singapore . the offshore market, but we will probably not see massive outflows given the capital limits in place. "
Investors have been Stacking in the relative security of the government debt that stocks have sold, but even then investors were disappointed. The last time the PBOC lowered the reserve rate in April, the 10-year yield has fallen the most since 2016. This time, it rose 1 basis point to 3.59%.
"Many traders were expecting a drop of one percentage point and some of them took profits," said David Qu, economist at Australia & New Zealand Banking Group Ltd. in Shanghai. "The margin of decline in yield is limited, interest rates are rising globally and a relatively loose Chinese monetary policy is already taken into account".
– With the help of Emma Dai
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