SHANGHAI, Aug 15 (Reuters) – China stocks fell on
Tuesday even after the central bank unexpectedly cut key policy
rates to support growth, following the latest data showing the
country’s economic activity slowed further last month.
China’s blue-chip CSI 300 Index dropped 0.5% by
the lunch recess, while the Hong Kong’s Hang Seng Index
fell 0.8% to hover around one-month lows.
The yuan also weakened to a nine-month low, and
sources told Reuters that China’s major state-owned banks
stepped into the spot market to steady the currency. Asian stock
markets wallowed at one-month lows.
Data on Tuesday showed China’s July industrial output and
retail sales growth slowed and undershot forecasts. To boost
confidence, the People’s Bank of China cut the rate of one-year
medium-term lending facility (MLF) by 15 basis points to 2.50%
to some financial institutions.
“The weak dataset continues to paint a bearish picture on
China after the Politburo meeting,” said UBS analysts in a note.
“Most investors are in wait-and-see mode, only willing to
allocate tactically to China on expectations of stimulus.”
Most sectors fell, with shares in tourism,
semiconductors, photovoltaic and media
companies losing more than 2% each to lead the
decline.
The weak market also comes as investors worry about
contagion risk in the country’s financial system, with default
risks at some housing developers and missed payments by a
private wealth management giant.
“The mix of risk events have put great pressure on the
entire market,” said Huang Yan, general manager of private fund
manager Shanghai QiuYang Capital.
“The rate cut is not particularly meaningful, and it has
only a short-term effect on stimulating the economy. China needs
a package of measures, and the core is to solve the demand
problem.”
Foreign investors sold China stocks for a seventh straight
session on Tuesday, dumping a net 8.4 billion yuan ($1.15
billion) on the day.
Tuesday’s figures come on top of a batch of already gloomy
data over the past week, including tumbling credit growth and
rising deflation risks. China’s top leaders had vowed to step up
policy support for the economy during last month’s Politburo
meeting.
Shares in under-pressure developer Country Garden
bounced 1.3% after it tumbled to record lows on default worries.
China Evergrande New Energy Vehicle Group jumped 14.7%
after the company said it has agreed to sell new shares to
U.S.-listed NWTN for $500 million.
($1 = 7.2746 Chinese yuan)
(Reporting by Shanghai Newsroom; Editing by Lincoln Feast)
