An investor watches a board showing stock information at a brokerage office in Beijing, China. — Reuters photo
SHANGHAI: China stocks tumbled when the market reopened yesterday after a long holiday, despite Beijing’s weekend move to slash the level of cash banks must hold as reserves, underscoring growing investor anxiety about the escalating Sino-US trade war.
The yuan was also down, as expectations of more easing measures by China, plus surging US bond yields, exert downward pressure on the Chinese currency.
Beijing has stepped up liquidity support across the financial system this year as policymakers have focused on calming fears of capital outflows and sought to soothe battered markets even as anxiety grows that the trade war with the United States could deal a damaging blow to the broader economy.
Yesterday, the blue-chip CSI300 index opened 2.3 per cent lower and at midday was down 3.6 per cent at 3,315.01 points.
The Shanghai Composite Index lost 3.0 per cent, to 2,738.04 points at the end of the morning session.
Hong Kong’s Hang Seng slumped 4.4 per cent last week as investors worried about the escalating trade row between the United States and China. It was off 0.9 per cent yesterday morning.
Yesterday was the first chance for mainland investors to react to the escalating trade tensions and a sell-off in Hong Kong markets last week after a week-long holiday on the mainland to celebrate National Day.
On Sunday, the People’s Bank of China (PBOC) announced a 100-basis-point cut to banks’ reserve requirement ratio, stepping up efforts to support the economy and calm market worries.
“An RRR cut is not enough to counter the impact of the trade war. The economy is quite weak, and I see a growing number of companies selling their assets,” said David Dai, general manager of Shanghai Wisdom Investment Co Ltd, a hedge fund.
“And this fall is not surprising after weak performance in external markets during the holiday.”
Last week, US Vice President Mike Pence intensified Washington’s pressure campaign against Beijing by accusing China of ‘malign’ efforts to undermine President Donald Trump ahead of next month’s congressional elections and of reckless military actions in the South China Sea.
And on Friday, Chinese technology stocks listed in Hong Kong, including Lenovo and ZTE Corp, slumped on a Bloomberg report that the systems of multiple US companies had been compromised by malicious computer chips inserted by Chinese spies.
China’s IT sector fell sharply, tumbling over 4 per cent in the morning session. Shenzhen-listed shares of ZTE Corp tumbled more than 6 per cent.
Real estate, consumer and healthcare sectors were also among the biggest casualties, all tumbling more than 4 per cent.
The market’s obliviousness toward the RRR cut – China’s central bank said the move would inject a net 750 billion yuan (US$109.2 billion) in cash into the banking system – highlights concerns that monetary easing alone would do little to heal battered confidence. — Reuters