BEIJING: China stocks slipped on Wednesday morning, after the yuan fell sharply for a second day, fuelling fears that money could flow out of the country’s equity markets into US dollar assets.
The yuan slid to a four-year low on Wednesday, triggering a surge in export-related stocks, but dealing further blows to sectors that rely heavily on overseas raw materials and energy.
He Kai, a fund manager of Bosera Asset Management, suggested investors increase exposure to US dollar assets, as he expects the yuan to gradually depreciate in the medium to long term.
The CSI300 index fell 0.4 per cent to 4,052.19 points at the end of the morning session, while the Shanghai Composite Index lost 0.5 per cent to 3,910.30 points.
Hong Kong stocks also fell, taking their cue from the mainland and sluggish global markets.
The Hang Seng index dropped 1.8 per cent to 24,068.29 points, while the Hong Kong China Enterprises Index lost 2.0 per cent to 11,043.76.
Chinese air carriers slumped for the second day in both China and Hong Kong, after some analysts downgraded the sector, saying yuan depreciation would hurt the bottom lines of such companies with heavy borrowings denominated in foreign currencies.
In Shanghai, China Eastern and China Southern both slumped more than 7 per cent by midday, while rival Air China lost 4.4 per cent. In Hong Kong, the three companies fell over 5 per cent.
