The relative tranquillity in China’s stock market came to a shuddering halt on Thursday with stocks plunging by more than 6% in late afternoon trade.
The benchmark Shanghai Composite index copped a hammering, closing the session down 6.4% at 2,741.2 points. It was the largest one-day percentage loss since January 26, and left the index at the lowest closing level seen since February 3.
Had the ill-fated market circuit breakers still been in plac – something removed on January 7 after the CSI 300 index plunged 7% in less than 15 minutes – the declines today would have triggered an early close to trade.
Investors probably wished they were still in place.
As the headline Shanghai Composite figure would suggest, there was no escaping the carnage with all sectors finishing deep in the red.
The largest declines came from the industrial and telecommunications sectors, which closed down by more than 8%. Financials, down 4.3%, were the relative overachievers.
Like the benchmark index, all other mainland indices finished the session nursing losses of more than 5%.
Small cap indices, in particular, suffered the largest falls with the CSI 500, Shenzhen Composite and tech-heavy ChiNext posting declines of more than 7%.
According to Bloomberg, a spike in short-term money market rates was one factor behind the enormous sell-off. The nation’s overnight repurchase rate spiked by 16 basis points to 2.12%, taking it back to highs not seen since February 6.
“Some banks were obliged to set aside more funds as reserves at a time when open-market operations are draining cash from the financial system,” said Bloomberg.
Alongside the spike in money market rates, the offshore traded yuan, or USD/CNH, also rose for a fifth day, sparking renewed concern over the potential for further yuan weakness.
As at 6.15pm AEDT, the USD/CNH was trading at 6.5385, up 0.1% for the session.
The renewed volatility coincided with the arrival of central bankers and finance ministers from around the globe before tomorrow’s G20 meeting.
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