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Chinese markets extended an already rough start to the year Monday, losing further ground and other Asian markets came along for the ride lower.
The Shanghai composite was down 3.34 percent, while the Shenzhen Composite shed 4.68 percent. Hong Kong’s Hang Seng index was down 2.46 percent on Monday, slipping below the 20,000 threshold for the first time since June 2013.
Reuters reported that the yuan-based Hong Kong Interbank Offered Rates (HIBOR) spiked to over 13 percent from 4 percent Friday as offshore yuan volume declined.
Last week, the Shanghai Composite lost all of its 2015 gains, falling by 9.97 percent in just five days.
Mainland brokerages suffered steep losses, with shares down as much as 4.6 percent. Citic Securities‘ mainland-listed shares were off 3.86 percent, while its Hong Kong-listed ones fell 5.53 percent. Airlines stocks on the mainland, however, rallied between 2.56 and 6.34 percent. Airlines tend to see an earnings boost when oil prices fall.
On Monday the People’s Bank of China (PBOC) guided the yuan higher by setting the mid-point fix at 6.5626 against the dollar. On Friday, the midpoint was fixed at 6.5636. The yuan traded at 6.5818 against the dollar.
Trading in Chinese markets was halted twice last week by circuit breakers – a market-calming regulatory tool – that were only implemented in the country at the start of the week.
The circuit breakers were designed to trigger a 15-minute trading halt if the CSI 300 index fell 5 percent. If that index moved by 7 percent, trade was halted for the rest of the session. By the end of the week, China suspended its circuit breakers, but investors remained wary over the country’s ability to handle financial turmoil.
Experts said the ongoing crisis in Asia’s largest economy would have bigger, broader implications about the region’s economic prospects.
Taimur Baig, chief economist for Asia at Deutsche Bank Research, said in a note on Friday, “The key risk is China, where fears of continued economic slide are causing capital outflows, exchange rate depreciation, asset market selloff, and policy dilemmas.”
Baig noted that while this might not halt economic growth in the mainland, with large parts of the economy operating independently of the country’s stock markets, it would hurt sentiment — not just in China, but also in rest of Asia, causing possible deflation, credit crunches and policy challenges.
View source: http://www.cnbc.com/2016/01/10/asian-stock-markets-weighed-by-china-markets-slowdown-worries-oil.html
