SHANGHAI/HONG KONG: Chinese stocks hit nine-month lows and the yuan tumbled on Monday, as efforts by authorities to revive demand failed to excite investors who are becoming less confident in Beijing’s ability to restore momentum in the economy.
Smaller-than-expected cut in a key lending benchmark disappointed markets and highlighted the constraints Beijing faces in trying to revive demand through monetary easing amid broader worries about currency weakness and capital flight.
The world’s second-largest economy is currently facing an unprecedented debt crisis in its massive property sector, which has soured investor sentiment in the country as growth stalls.
China’s blue-chip index and Hong Kong’s Hang Seng Index both dropped to the lowest level since late November last year, underwhelmed by a package of measures China’s securities regulators announced on Friday aimed at boosting investor confidence. The declines came even as listed firms and fund managers heeded the securities regulator’s call and rushed to unveil share purchases over the weekend.
“China’s corporates and households are in a deleveraging mode, and rate cuts will not be enough to change that. Authorities are likely starting to realise that,” said Charu Chanana, market strategist at Saxo in Singapore.
“Rate cuts only put more pressure on banks, and broader measures to address capital adequacy and solvency issues will be needed to revive sentiment and activity levels.”
The onshore yuan eased roughly 0.3% to about 7.30 per dollar.
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