China and Hong Kong markets sink on fear of US dollar strength, Beijing scaling back stimulus
- Shanghai Composite Index suffers biggest decline in nearly 7 weeks
- Are markets entering a period of correction? Some analysts think so
Leading China and Hong Kong benchmarks all declined to multiple-week lows Thursday, amid concerns about US dollar strength and Beijing signals that it will withhold further economic stimulus.
The Hang Seng Index posted losses for the fifth straight trading day, falling 0.86 per cent to close at a four-week low. It ended down 0.9 per cent to 29,549.80.
The Shanghai Composite Index closed down 2.4 per cent, or 77.8 points to 3,123.83, its largest decline in almost seven weeks. In Shenzhen, the ChiNext Index of technology stocks listed also closed down 2.8 per cent, or 48.87 points, to 1,669.98.
Their declines have come amid net outflows from Chinese stocks recorded through the Hong Kong stock connect three days in a row. On Wednesday, which was the latest data available from the Hong Kong stock exchange, a net outflow of 3.525 billion yuan was recorded from both Shanghai and Shenzhen northbound, meaning selling interests of Shanghai and Shenzhen listed-stocks outweigh those of buying.
Ben Kwong, an executive director at KGI Asia, said that the strengthening of the US dollar has traditionally been unfavourable to emerging markets, including Chinese equities. Overnight, the US dollar index rose above the 98 level for the first time in about two years. This comes as the yuan has weakened to a near one-month low, at 6.7402 per dollar.