China’s stocks fall most in three weeks on weak­en­ing yuan


Chi­nese stocks dropped the most in three weeks on Mon­day, led by in­dus­trial com­pa­nies and small-cap shares, amid con­cerns that a weaker yuan will limit prospects for fur­ther stim­u­lus and that State-backed funds will sell shares.

The Shang­hai Com­pos­ite Index de­clined 0.75 per­cent at the close. Bei­jing Orig­in­wa­ter Tech­nol­ogy Co posted its big­gest loss since Fe­bru­ary.

The ChiNext gauge of small-cap startup com­pa­nies slid the most since July 27. Off­shore Oil En­gi­neer­ing Co re­treated 2.5 per­cent in Shang­hai as crude oil fell in New York.

The yuan weak­ened to its low­est level in al­most two weeks as in­creas­ing spec­u­la­tion that the Fed­eral Reserve will raise in­ter­est rates this year drove up the dol­lar.

China’s cen­tral bank has kept bor­row­ing costs on hold since Oc­to­ber. China Se­cu­ri­ties Fi­nance Corp and other

the de­cline in the bench­mark Shang­hai Com­pos­ite Index

gov­ern­ment-linked funds sold bank shares after the na­tion’s bench­mark eq­uity index jumped to a sev­en­month high, mar­ket sources said.

The move by CSF, which was armed with more than $480 bil­lion to prop up share prices dur­ing last sum­mer’s eq­uity mar­ket rout, may sig­nal con­fi­dence among Chi­nese pol­i­cy­mak­ers that the $6.5 tril­lion mar­ket is grow­ing strong enough to stand on its own.

CSF’s big­gest hold­ings at the end of last year were in fi­nan­cial com­pa­nies, whose heavy weight­ings in bench­mark in­dexes make them prime can­di­dates for gov­ern­ment in­ter­ven­tion.

“The na­tional team­may be seek­ing to pre­vent a stock bub­ble,” saidZhangHaidong, chief strate­gist at Jinkuang In­vest­men­tMan­age­ment.

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