Chinese stocks are cratering again

  • Chinese stocks are getting thumped. Again.
  • The benchmark Shanghai Composite Index has fallen 30% from late January, leaving it at the lowest level since November 2014.
  • The Chinese yuan also hit the weakest level against the greenback since January 2017 after the US Treasury Department cleared China of being a currency manipulator.

Chinese stocks are tumbling on Thursday. Again.

Here’s the scoreboard with a hour left to trade.

Shanghai Composite 2,508.11 , -2.09%
SSE50 2,385.22 , -1.81%
Shenzhen Composite 1,243.28 , -1.84%
CSI300 3,067.02 , -1.64%
CSI500 4,067.12 , -1.60%
Hang Seng 25,674.66 , -0.38%
USD/CNY 6.9365 , 0.15%
USD/CNH 6.9366 , 0.11%

In what’s now becoming the norm rather than the exception to the rule, all major indices are currently nursing losses of more than 1%.

The benchmark Shanghai Composite Index is leading the declines with a steep fall of 2.09%. It had been down as much as 2.3% earlier in the day.

The Composite now lost over 30% from the highs struck in late January this year, making this not only a bear market but a big bear market at that.

It now sits at the lowest level since November 2014.

Shanghai Composite Weekly Chart

Every single sector is trading in the red with energy down a whopping 4.5%, a move likely in response to a steep drop in WTI and Brent crude futures on Wednesday.

Industrials, healthcare and materials are also down more than 2% so far in the session.

The steep declines could reflect the continued impact of forced selling given the large and growing slide in stocks this year.

According to Bloomberg, about 4.18 trillion yuan, or $US603 billion worth of shares have been put up by company founders and other major investors as collateral for loans, accounting for about 11% of the country’s stock market capitalisation based on calculations using China Securities Depository and Clearing Corporation data.

As stocks have fallen pledged shareholdings risk being liquidated to settle outstanding debts, creating a spiral effect of selling pressure.

Like stocks, the Chinese yuan has also been in the wars on Thursday, falling to the lowest level since early January 2017.

The USD/CNY — onshore traded yuan — hit a session high of 6.9414 before easing back to trade at 6.9365.

The selloff followed the release of a report from the US Treasury Department that stopped short of labeling China as a currency manipulator.

While that outcome was widely expected, it may have prompted a fresh wave of yuan selling to test the resolve of US and Chinese regulators.

Bloomberg has more here.