HONG KONG: China’s yuan gave up earlier gains that came after the central bank was said to have met with major lenders to emphasize currency stability, while mainland stocks fell following their best day in more than two years.
The yuan was little change at 6.8264 per dollar as of 10:29 a.m. in Shanghai, paring an earlier gain of 0.48 percent, while the offshore-traded currency slipped. The Shanghai Composite Index dropped 0.4 percent, stripping off some of Tuesday’s 2.7 percent rally. Hong Kong’s Hang Seng Index was little changing after erasing a 0.8 percent advance.
The People’s Bank of China at a meeting on Monday urged top banks to prevent any “herd behavior” and momentum-chasing moves in the foreign-exchange market, according to people familiar with the matter. That marked the latest move by China to promote stability in the yuan, after it made betting against the currency more expensive on Friday.
“We could see further near-term recovery in the yuan, if the market senses that policy support being provided by Chinese policy makers is able to shore up growth,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. He said news about the PBOC’s meeting with banks has helped sentiment.
The yuan has weakened more than 6 percent against the dollar in the past three months, the worst performing currency in Asia. The decline has come amid an intensifying trade dispute with the U.S. and signs of a slowing economy at home.
China’s equity market is also among the worst in the world this year. The Shanghai Composite has tumbled 22 percent from a January peak, while the ChiNext gauge of small caps and technology stocks has also slumped 22 percent from its 2018 high reached at the end of March. Hong Kong hasn’t escaped: a gauge of Chinese stocks in the city is 21 percent below its January high, while the benchmark Hang Seng Index has lost 15 percent.
Great Wall Motor Co. led declines on the Hang Seng China Enterprises Index on Wednesday, sliding 9.1 percent after reporting its July sales volume fell from a year earlier. Dongfeng Motor Group Co. and Guangzhou Automobile Group Co. were also among the worst performers on the gauge.
Tencent Holdings Ltd. helped prop up the benchmark Hang Seng Index, as the tech giant rose for a fourth day, its best run in two months. - Bloomberg
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