Shares in China and Hong Kong fell yesterday as the yuan eased against the dollar, reigniting fears that Beijing may be intent on a deeper devaluation of the currency despite the central bank’s comments that it sees no reason for a further slide. Futures augured a downbeat day for Wall Street.
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“The US markets have held up well of late, being viewed as somewhat of a safe haven”, Chris Weston, chief market strategist in Melbourne at IG Ltd., said by e-mail. Stocks in Taiwan and Indonesia were also lower but markets in Thailand and New Zealand were stable. “Short-term sentiment is pretty weak”. The index has fallen more than 20% from a high reached in April, the definition of a bear market. The Shanghai gauge has lost 11 per cent this week.
London’s benchmark FTSE 100 index closed down 0.56 percent compared with Wednesday’s close at 6,367.89 points. The slump threatens to undermine confidence in President Xi Jinping’s ability to manage the economy. Japan’s Topix index slumped 1.8 percent. Numbers below 50 show a contraction.
“It looks like based on commodity prices, China, wages not really picking up, that [Fed officials] are not getting any closer to meeting their inflation target and seems like they’re probably not going to be willing to go in September” with a rate hike, said Don Ellenberger, head of multi-sector strategies at Federated Investors in Pittsburgh. “That is worrying for the global economy“.
Shares in Asia fell Thursday, as the outlook for the timing of a rise in U.S. interest rates remains cloudy and investors brace for the impact of the global Monetary Fund’s signals that it won’t add the yuan to its basket of reserve currencies for at least a year.
As the state battles to prop up stock prices, investors with the most at stake are cashing out. That puts it within shooting range of what traders call a “correction”, or a fall from a high of more 10 percent.
The SSEC is now down about 7 percent since China devalued the yuan by almost 2 percent on August 11. It has also cut down its issue of bonds to make room for one trillion yuan of local government bonds that are due to arrive in the market under the central government’s mandated debt swap programme. About 17 percent of mainland-listed shares remain halted.
Greece was set to get the first €26bn tranche of its €86bn bailout, but traders focused instead on another downbeat session in the Chinese stock market. The ratio was 68 at the peak of China’s equity bubble in 2007, according to data compiled by Bloomberg.
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“The concern over the weak economy is definitely there”, Phillip Securities analyst Chen Xingyu told AFP. Profits at Chinese industrial firms declined by 0.3 per cent in June, versus a 0.6 percent gain in the previous month.
