China stocks slid in late afternoon trade after a relatively steady morning session on Wednesday, underscoring the fragility of investor sentiment following last week's rout. The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 1.9 percent, to 3,155.88, while the Shanghai Composite Index lost 2.4 percent, to 2,949.60 points.
Trading was calm in the morning, amid signs that the yuan was stabilising after intervention by China's central bank. Analysts pointed out, however, that trading volume was thin, signalling that many investors were standing on the sidelines and putting money elsewhere.
Latest data show China's recent stock market rout has further dampened risk taking. Investors have been slashing leveraged bets on stocks, seeking safe haven in bonds and money market funds, and stepping up investment overseas. The chance of foreign speculators further knocking down the yuan in a tug of war with the People's Bank of China (PBOC) is slim because the central bank still has ample foreign currency reserves and China's economy is not doomed, said Yang Hai, analyst at Kaiyuan Securities.
"It's not wise to fight PBOC," Yang said. "A stabilising yuan would help recover confidence in Chinese stocks." The central bank has held the yuan's daily midpoint steady in the past few days and used state banks to soak up liquidity in Hong Kong which has made it prohibitively expensive to bet against the yuan offshore.
Analysts pointed out, however, that trading volume was continuing to wane, signalling that many investors were standing on the sidelines and putting money elsewhere. Latest data show China's recent stock market rout has further dampened risk taking. Investors have been slashing leveraged bets on stocks, seeking safe haven in bonds and money market funds, and stepping up investment overseas.