China Stocks Plunge More Than 6% as Money-Market Rates Increase
China’s stocks tumbled the most in a month as surging money-market rates signaled tighter liquidity and the offshore yuan declined for a fifth day.
The Shanghai Composite Index sank 6.4 percent at the 3 p.m. close, extending its declines this year to 23 percent. About 400 stocks on the gauge fell by the 10 percent daily limit. The overnight money rate, a gauge of liquidity in the financial system, climbed the most since Feb. 6. The Hang Seng China Enterprises Index retreated for a third day.
The return of volatility in mainland equities will raise the stakes for the nation’s policy makers as Shanghai prepares to host finance chiefs and central bankers from the Group of 20 meetings tomorrow. Today’s declines have almost wiped out a 10 percent rebound from a January low.
“ The market is in a quite fragile state when everyone scrambles for an exit,” said Central China Securities Shanghai based strategist Zhang Gang.“None of the news in the market is sufficient enough to trigger such a slump.”
The Hang Seng Index lost 1.5 percent at 3:02 p.m. in Hong Kong, while the Hang Seng China Enterprises retreated 2.2 percent. The CSI 300 Index declined 6.1 percent.
China’s overnight repurchase rate increased 16 basis points to 2.12 percent. Some banks were obliged to set aside more funds as reserves at a time when open-market operations are draining cash from the financial system.
The first indicators for China’s economy this month signal its slowdown hasn’t bottomed out yet, despite banks extending record new loans in January. Private gauges of manufacturing and services fell to new lows, a reading of business confidence slipped, and interest in small and medium sized businesses deteriorated, the readings show. If confirmed in official data for February that starts to roll out from March 1, such weakness would suggest a slowdown in the nation’s old growth drivers may be deepening.
Source: Bloomberg
