Daily Report | China markets drop suddenly as B shares plunge 6 per cent on yuan fears
Shanghai B share index falls the most since January 11, as PBOC sets the yuan reference rate at a new six-year low
Chinese stocks had a sudden reversal in late trading and closed Monday with losses, triggered by a 6 per cent plunge in Shanghai’s US dollar-denominated stock index as fears mounted over possible further sharp declines in the yuan.
The benchmark Shanghai Composite Index, having kept its head above water in the morning, fell sharply in the final hour of trading, closing down 0.7 per cent or 22.64 points at 3,041.17, the biggest percentage drop in three weeks.
The sudden drop coincided with a late plunge in the Shanghai Stock Exchange B Share Index, which tracks publicly-listed Chinese firms but is denominated in US dollars and accessible to foreign investors. It sank 6.2 per cent or 21.995 points to end at 335.681 after briefly falling as much as 6.7 per cent in earlier trade, marking the steepest percentage decline since January 11.
On Monday, the People’s Bank of China drastically lowered the yuan’s official reference rate, setting it at 6.7379 per US dollar, a fresh six-year low. On October 1, the currency was introduced to the IMF’s prestigious Special Drawing Rights (SDR) basket, paving its way for wider adoption in global trade.
The yuan has fallen sharply in the past two weeks and we expect it to face continued depreciation
“The yuan has fallen sharply in the past two weeks and we expect it to face continued depreciation pressure in the coming months, as the Federal Reserve comes closer to a rate increase,” said Zhang Jie, an analyst for China Investment Securities.