REUTERS
China's stocks tumbled the most in a month as surging money-market rates signaled tighter liquidity and the offshore yuan declined for a fifth day, according to Bloomberg.
The Shanghai Composite Index sank 6.4% at the close, with about 70 stocks falling for each that rose. Industrial and technology companies led losses. The overnight money rate, a gauge of liquidity in the financial system, climbed the most since February 6, Bloomberg wrote.
The plunge in equities underscores the challenge for China's policy makers as they seek to project an image of stability in the nation's financial markets as the economy slows. Finance chiefs and central bankers from the Group of 20 will meet in Shanghai on Friday, while the annual meeting of the legislature begins in Beijing next week. The return of volatility is also a test for China's new top securities regulator, who took over on the weekend after his predecessor was removed amid criticism of mismanagement.
"The market is in a quite fragile state when everyone scrambles for an exit," said Central China Securities Shanghai based strategist Zhang Gang. "None of the news in the market is sufficient enough to trigger such a slump."
Today's declines almost erased a 10% rebound in the benchmark equity index from a January low. The Shanghai Composite has fallen 23% this year, the world's worst performer after Greece. Volumes on the gauge were 43% above the 30-day average.
The Hang Seng Index lost 1.5% at 15:39 in Hong Kong, while the Hang Seng China Enterprises Index retreated 2.4%. The CSI 300 Index declined 6.1%, with gauges of technology and industrial companies plunging more than 7%.
China's overnight repurchase rate increased 16 basis points to 2.12%. Some banks were obliged to set aside more funds as reserves at a time when open-market operations are draining cash from the financial system.
The first indicators for China's economy this month signal its slowdown hasn't bottomed out yet, despite banks extending record new loans in January. Private gauges of manufacturing and services fell to new lows, a reading of business confidence slipped, and interest in small and medium sized businesses deteriorated, the readings show. If confirmed in official data for February that starts to roll out from March 1, such weakness would suggest a slowdown in the nation's old growth drivers may be deepening.