CHINESE stocks yesterday handed back their gains from a bounce Friday, in the worst start to a second half of a year since 2015, as selling resumed amid worries over a falling currency, housing curbs and the impact of U.S. trade tariffs. The Shanghai Composite Index sank 2.52 percent, more than wiping out a 2.2 percent rally Friday, and extending last month’s 8 percent rout. The blue chip CSI300 index was down 2.93 percent. The yuan retreated 0.5 percent to an eight-month low after depreciating by a record in June. Markets are jittery ahead of a July 6 deadline when the United States is due to impose the tariffs on Chinese exports. China is expected to respond with tariffs of its own on U.S. goods. Even before the tariffs kick in, a private survey showed manufacturing activity in China slowed slightly. China’s Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) declined to 51 in June from May’s 51.1, with a subindex showing new export orders contracting for the third straight month and the most in two years. On Friday, Chinese stocks and the yuan bounced with benchmark share indexes having one of their best days since mid-2016. Still, June represented the worst month for Chinese stocks in more than two years and the yuan’s biggest monthly fall on record. Chen Xiaopeng, an analyst with Sealand Securities, said more pessimism was on the cards for stock investors with the country’s economic outlook hurt by prospects of a full-blown trade war between China and the United States. “It could take at least several months for the major stock indexes to bottom out,” he said. Uncertainties will reinforce investors’ inclination to “huddle together for warmth” in outperforming sectors such as consumers and health care, Chen said. Domestic issues are also hurting sentiment, with a gauge of property shares falling to the lowest since October 2016 yesterday. “Expectations that China will impose more property controls are weighing on developer shares as the market is still overheated,” said Jiang Yining, a Shanghai-based analyst with Capital Securities. The yuan fell 3.25 percent against the U.S. dollar in June and continued its slide despite a firmer-than-expected midpoint set by the central bank yesterday. “Investors don’t care and spot yuan rates continued weakening,” a trader said. (SD-Agencies) |