China's blue chip stocks tumbled the most in three months on Monday, tracking a sharp retreat in global markets as investors were spooked by talk of a possible US rate hike next week, sending bond yields up and pressuring the Chinese currency.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 1.7 percent, to 3,262.60, posting its biggest percentage loss since June 13.
The Shanghai Composite Index lost 1.8 percent to 3,021.98 points, booking the worst day since July 27.
Investors were concerned that the US Federal Reserve would raise interest rates as early as next week, after Boston Fed President Eric Rosengren said in a speech on Friday that gradual interest rate increases might be in order with the US economy at full employment and that low interest rates were increasing the chance of an overheated economy.
China's state-owned banks sold dollars to keep the currency stable in the morning trade after the Chinese central bank sharply weakened its official fixing, two traders told Reuters.
"Shifting US interest rate expectation will trigger volatility in funding costs, bond prices and the RMB. And volatility can spill," Hong Hao, chief strategist at BOCOM International wrote on Monday.
"Long-term investors should pause for better allocation opportunities ahead in Hong Kong."
After the European central bank last week disappointed the market by holding its monetary policies unchanged, there are increasing concerns over possible changes in global liquidity conditions amid talk the Federal Reserve might be serious about lifting US interest rates as early as next week.
The prospects of a US rate increase also put pressure on the Chinese currency. The Chinese central bank sharply weakened the yuan's official fixing on Monday, although the currency firmed by midday as state-owned banks sold dollars to keep the yuan stable.
Comments
Comments are closed.