China stock market

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

The yuan slides to lowest level in 12 months, falling to 6.7514 against the US dollar in onshore trading

PUBLISHED : Thursday, 19 July, 2018, 5:29pm
UPDATED : Thursday, 19 July, 2018, 5:47pm

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.”

The uncertainty of the economic outlook and policies are still hanging over the market
Wang Zheng, Jingxi Investment Management

China Southern Airlines slumped 5.3 per cent to 6.81 yuan. Air China sank 5 per cent to 7.37 yuan and China Eastern Airlines also lost 5 per cent to 5.70 yuan. A weakening yuan will increase the repatriated values of the Chinese airlines’ debts, denominated in foreign currencies.

Two units of indebted conglomerate HNA Group tumbled as the stocks resumed trading after being suspended for six months, erasing 10.7 billion yuan in market value. HNA-Caissa Travel Group fell by the 10 per cent daily cap to 11.61 yuan on an announcement to terminate its asset revamp plan, while Bohai Capital Holding also dropped 10 per cent to 4.27 yuan.

Shares of HNA’s other five mainland-listed arms remain suspended amid investor concerns about its financial distress.

Focus Media Information Technology jumped by the 10 per cent daily limit to 10.93 yuan after three wholly-owned units of Alibaba Group Holding bought a combined 10.3 per cent of stake in the company for 15 billion yuan (US$2.2 billion).

In Hong Kong, the Hang Seng Index lost 106.56 points to 28,010.86, the lowest close since September 29. The Hang Seng China Enterprises Index retreated 0.5 per cent.

Want Want China Holdings was the worst performer on the benchmark, falling 3.8 per cent to HK$6.62. Geely Automobile Holdings shed 3.7 per cent to HK$19.26 and China Mengniu Dairy lost 3.6 per cent to HK$25.30.