BEIJING: Chinese stocks fell for a third day in volatile trading as a People’s Bank of China meeting failed to ease analysts’ concerns about further yuan weakening after a three-day rout for the currency.
The Shanghai Composite Index slid 0.6 percent to 3,862.06 at the 11:30 a.m. break, wiping out a gain of as much as 1.1 percent. Energy and industrial companies led declines. The yuan slipped 0.3 percent for a three-day loss of 3.2 percent following Tuesday’s surprise devaluation. There’s no basis for depreciation to persist and the central bank is capable of keeping the currency at an equilibrium level, PBOC Assistant Governor Zhang Xiaohui said Thursday at a briefing in Beijing.
“Sentiment became wobbly after the PBOC conference,” said Jimmy Zuo, a trader at Guosen Securities Co. in Shenzhen. “Leaving foreign exchange rates to market forces means more depreciation ahead. There’s a fear that capital will leave China, affecting the bond market and pushing up interest rates.”
China’s decision to devalue its currency has roiled global markets, triggering the biggest two-day selloff of Asian currencies in four years and prompting Vietnam to widen the dong’s trading band. An extended slide risks triggering a series of competitive devaluations and threatens a global deflation shock as prices of exports and commodities fall.
The PBOC will step in when the market is “distorted,” Deputy Governor Yi Gang said at the same briefing. The comments were made after the fixing rate of the yuan dropped 1.1 percent to 6.401 per dollar today, after slides of 1.6 percent and 1.9 percent in the past two days.
