China stocks gave up early gains to close lower on Monday, as an expected reserve requirement ratio (RRR) cut was largely offset by lingering trade war fears.
SHANGHAI: China stocks gave up early gains to close lower on Monday, as an expected reserve requirement ratio (RRR) cut was largely offset by lingering trade war fears, and as a weakening yuan pushed lower real estate and airline shares.
The blue-chip CSI300 index fell 1.3 percent to 3,560.48, while the Shanghai Composite Index slid 1.1 percent to 2,859.34.
The U.S. Treasury Department is drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with "industrially significant technology," a government official briefed on the matter said on Sunday.
Policymakers in China moved fast to temper any potential economic drag from the trade dispute with the United States, with the central bank on Sunday saying it would cut the amount of cash that some banks must hold as reserves by 50 basis points.
The reduction in reserves, the third by the central bank this year, had been widely anticipated by investors and is aimed to accelerate the pace of debt-for-equity swaps and spur lending to smaller firms.
"The targeted RRR cut is a structural policy for certain key or backward sectors rather than an across-the-board easing, though there is still room for further RRR cuts within the year," Shenwan Hongyuan Securities wrote in note.
For the day, real estate and airline shares led the losses amid a falling yuan.
China's yuan fell to a 5-1/2-month low against the U.S. dollar, effectively erasing all of this year's gains, after the central bank freed up for lending some capital that commercial banks have to hold as reserves.
Real estate firms tumbled 4.9 percent, as a weakening yuan raised fears of capital outflow that could weigh on assets prices.
Airline shares also plunged, with Air China and China Eastern Airlines closing down by the daily limit of 10 percent, on concerns a weakening yuan could bode ill for those companies with dollar-denominated debts and push up their fuel costs.
Around the region, MSCI's Asia ex-Japan stock index was weaker by 1.01 percent, while Japan's Nikkei index closed down 0.79 percent.
At 07:03 GMT, the yuan was quoted at 6.5336 per U.S. dollar, 0.59 percent weaker than the previous close of 6.495.
The largest percentage gainers on the main Shanghai Composite index were Shandong Daye Co Ltd, up 10.03 percent, followed by BanBao Co Ltd, gaining 10.02 percent, and Wuxi Acryl Technology Co Ltd, up by 10.01 percent.
The largest percentage losers on the Shanghai index were NINGBO BIRD Co Ltd, down 10.12 percent, followed by Guangzhou Yuetai Group Co Ltd, losing 10.08 percent, and Air China Ltd, down by 10.03 percent.
So far this year, the Shanghai stock index is down 13.5 percent, the CSI300 has fallen 11.7 percent, while China's H-share index listed in Hong Kong is down 4.7 percent. Shanghai stocks have declined 7.61 percent this month.
About 12.19 billion shares were traded on the Shanghai exchange, roughly 90.4 percent of the market's 30-day moving average of 13.49 billion shares a day. The volume in the previous trading session was 12.61 billion.
As of 07:04 GMT, China's A-shares were trading at a premium of 20.21 percent over the Hong Kong-listed H-shares. - Reuters
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