Battered China stocks off to worst start to second half since 2015

Battered China stocks off to worst start to second half since 2015

Recent fluctuations in China's foreign exchange market were largely due to a stronger USA dollar and external uncertainties, Yi Gang, governor of the People's Bank of China (PBOC), said on Tuesday.

Among the actives, Galaxy Entertainment plummeted 6.50 percent, while Sands China plunged 6.20 percent, SCPC Pharmaceuticals tumbled 2.32 percent, China Mobile and Ping An Insurance both skidded 2.01 percent, China Life dropped 1.93 percent, Industrial and Commercial Bank retreated 1.70 percent, China Mengniu Dairy declined 1.69 percent, CNOOC shed 1.62 percent, China Petroleum and Chemical (Sinopec) lost 1.57 percent, Sino Land slid 1.10 percent, New World Development advanced 0.91 percent, WH Group fell 0.63 percent, Henderson Land added 0.48 percent and Hong Kong & China Gas was unchanged. In recent action, one dollar bought 6.6298 yuan, compared with 6.6672 yuan on Tuesday.

Four traders told Reuters that major state-owned banks were seen swapping yuan for dollars in the forwards market and immediately selling some of them into spot market, which helped support the Chinese currency. Beijing is expected to respond with tariffs of its own on US goods.

Chinese stocks slipped on Monday, handing back some hard-won gains from a bounce late last week as worries mount ahead of a US move to impose $34 billion of tariffs on Chinese exports, Reuters reports.

State-controlled media had earlier called the fall in stocks an "irrational overreaction" and urged investors not to panic over the growing trade frictions.

The yuan was last traded at 6.6960 per dollar.

The Canadian dollar strengthened against greenback on Tuesday as oil prices rose to 3-1/2-year highs and domestic manufacturing data supported the view that the Bank of Canada will hike interest rates next week.

The central bank earlier set the midpoint at 6.6497 yuan per dollar, its weakest fixing in about 10 months.


Yi also added that China will continue to implement prudent and neutral monetary policy to keep the yuan basically stable at a reasonable level.

"A weaker currency would, at most, be a shield, safeguarding wider damage from a trade war and the hurdles faced by Chinese companies' operating in the USA", it said.

The benchmark CSI300 Index was down 0.85 per cent by the lunch break, and the Shanghai Composite Index was off 0.68 per cent.

The recovery came after the People's Bank of China (PBOC) said it would keep the nation's currency stable and not deploy it as a weapon in the trade conflict with the United States, calming worries that any escalation in the standoff would lead to a slowdown in economic growth.

Another foreign exchange trader at a Chinese bank in Shanghai said those comments went some way toward calming a jittery market.

Hong Kong's Hang Seng Index was hammered after a one-day hiatus on Monday to mark the day that the former British colony was returned to China.

"I detected increasing alarm over trade tensions and a lot of nervousness about a full blown trade war, which comes at a bad time for China where the economy is undergoing a downdraft at the same time the United States is seeing a sharp upturn", Aninda Mitra, Singapore-based senior sovereign analyst at BNY Mellon Investment Management, who visited Shanghai last week, said in an emailed note to media.

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