China stocks tumble on G-20 disappointment, yuan weakness

An investor stands in front of an electronic board showing stock information at a brokerage house, in Hangzhou, on Feb 25, 2016.
An investor stands in front of an electronic board showing stock information at a brokerage house, in Hangzhou, on Feb 25, 2016. PHOTO: REUTERS

SHANGHAI (BLOOMBERG, AFP) - Chinese stocks tumbled by the break on Monday (Feb 29), hit by worries about the slowing economy after only vague G-20 growth pledges over the weekend and as the yuan currency weakened.

The benchmark Shanghai Composite Index slumped 3.39 per cent, after sinking as much as 4.44 per cent in the morning to the lowest level since November 2014.

The Shenzhen Composite Index, which tracks stocks on China's second exchange fell 4.48 per cent. It plunged 6.14 per cent earlier in the day.

In Hong Kong, the Hang Seng Index lost 0.95 per cent, or 184.31 points, to 19,179.84.

China's central bank on Monday fixed its central rate for the yuan currency at a four-week low, data showed, despite comments by chief Zhou Xiaochuan that there was no basis for further depreciation.

The People's Bank of China (PBoC) set the yuan at 6.5452 to US$1, down 0.17 per cent from Friday, according to the China Foreign Exchange Trade System. The fix was the weakest since Feb 3. The weaker currency hurt sentiment on the stock market.

Investors' focus is shifting to China's National People's Congress, which is scheduled to begin on March 5, after finance chiefs from the G-20 agreed to consult closely on foreign exchange markets and reiterated past pledges to refrain from competitive devaluations.

Volatility is returning to Chinese stocks, with a gauge of 50-day price swings climbing to the highest levels since November.

China is due to release its first gauge of economic strength for February on Tuesday with the release of the Purchasers' Manufacturing Index. The measure probably remained unchanged at 49.4 from a month earlier, according to the median estimate in a Bloomberg survey. Reading below 50 indicates contraction.

Margin traders reduced holdings of shares purchased with borrowed money on Friday, with the outstanding balance of margin debt on the Shanghai Stock Exchange falling to 509.9 billion yuan (S$109 billion), the lowest level since November 2014.

The China Securities Regulatory Commission may shelve the overhaul of initial public offering processes and the start of the Shenzhen-Hong Kong exchange link as new chairman Liu Shiyu's priority will be promoting stability rather than reforms, the South China Morning Post reported, citing unnamed "industry insiders".