CHINA’S stocks fell the most in three weeks yesterday, with sentiment soured by a late afternoon tumble in Shanghai’s U.S. dollar-denominated B shares as the yuan continued to weaken to fresh six-year low yesterday.

    The Shanghai B-share index tumbled as much as 6.7 percent, the largest intraday fall since Jan. 12, with virtually all the losses coming in the last 90 minutes of trading, before closing down 6.2 percent. Shenzhen’s Hong Kong dollar-denominated B shares also slumped, with the Shenzhen B-share index closing down 2.43 percent.

    At least five stocks dropped by the 10 percent daily limit, including Kama Co. and Shanghai Lingyun Industries Development Co.

    B shares’ sudden drop weighed on yuan-denominated A shares, sending the Shanghai Composite Index and the Shenzhen Composite down 0.7 percent and 1 percent respectively for the day.

    B shares were first issued in 1992 to give domestic companies a way to raise funds from foreign investors, who were banned from buying securities denominated in yuan.

    The Shanghai B-share index trades at about 30 times reported earnings, almost double the 18 multiple for the Shanghai Composite Index, comprising both yuan-denominated A and foreign-currency B shares.

    The B-share selloff comes amid increasing worries about yuan’s value, which touched a fresh, six-year low against the greenback yesterday. As B shares are U.S. and Hong Kong dollar-denominated shares in Chinese mainland companies, thus they are vulnerable to further yuan depreciation.

    “There’s no clear explanation on the sudden drop as of yet,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “But most investors are deeply concerned about the yuan’s depreciation and capital outflows as the yuan approaches 6.8. Overall market sentiment is very poor and selling in the B-share index is spreading.” (SD-Agencies)