China’s stocks post longest losing streak in almost two months as yuan drops to one-year low

China’s stocks fell for a fifth day, with the benchmark gauge having its longest stretch of declines in almost two months, as the yuan’s depreciation to the lowest level in a year tempered signs of credit loosening.

The Shanghai Composite Index retreated 0.5 per cent on Thursday, taking its drop to 2.3 per cent within five days. The streak of declines was the longest since a six-day period ended on May 30. Hong Kong’s Hang Seng Index fell 0.4 per cent to a 10-month low.

China Southern Airlines and other carriers tumbled as the yuan slid to the lowest level in 12 months after the central bank lowered the reference rate amid the intensifying trade spat with the US. The Chinese currency fell as much as 0.5 per cent to 6.7514 against the US dollar in onshore trading on Thursday.

Losses on equites were limited by the call for looser credit by policymakers to aid economic growth. The regulator overseeing the banking and insurance industries said in a statement on its website that big lenders should lead the move to boost lending to smaller companies to cut their financing costs.

Trading was thin as traders sat tight to see if the government will further ease policies at a time when growth is facing a downside risk amid the trade war and financial deleveraging. Turnovers on the Shanghai and Shenzhen exchanges were at least 11 per cent below the 30-day averages, according to Bloomberg data.

“There are no new participants coming to this market as investors need to see more clearly what the government will do further to support the economy,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “The uncertainty of the economic outlook and policies is still hanging over the market.”