B shares fall on weakening renminbi
Foreign-currency denominated stocks are small part of Shanghai and Shenzhen markets
China’s B shares plunged on Monday after the value of the renminbi against the US dollar slid to the lowest in six years.
The gauge of the B shares, the foreign-currency denominated stocks of Chinese companies listed in Shanghai and Shenzhen, tumbled by 6.15 percent to 335.68 points.
The slump also weighed on the RMB-denominated A shares on the benchmark Shanghai Composite Index, which tracks both A and B shares, which fell 0.74 percent to close at 3,041.17. The sudden market selloff in late trading came after the value of onshore RMB slumped to 6.74 against the US dollar as ofMonday afternoon, the lowest level in six years.
Analysts said that the weakening yuan could be the factor that triggered the selloff of the B shares. But, they said Monday’s slump is unlikely to have substantial impact on the A-shares given the small market capitalization of the B shares.
“The sudden slump of B shares could be triggered by the foreign exchangefactor. Theliquidityof the B shares is very limited so any single trading activity could cause big movement,” said Song Jin, an analyst at Dongxing Securities Co Ltd.
All eyes are now on China’s third quarter economic data including theGDPfigure, which is scheduled to be released on Wednesday and could influence investors’ trading decisions on the Chinese stock market.
The consensus forecast by economists surveyed by Bloomberg on China’s third quarter GDP growth is 6.7 percent.
“A downside miss would trigger hard-landing worries and an upside surprise would trigger overheating/leverage worries. The Shanghai Composite has climbed the wall of worry since February and we remain of the view that it will be among the top performing Asian stock markets in the final four months of the year,” said Tim Condon, chief Asia economist at ING Bank.
A downside miss would trigger hardlanding worries and an upside surprise would trigger overheating/leverage worries.” ING Bank
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The Chinese currency is facing rising depreciation pressure against the dollar as it is becoming increasingly clear that theUS Federal Reserve may be preparing the markets for an imminent rate hike this year which should keep the dollar bullish, said Lukman Otunuga, a research analyst at FXTM Ltd, an online currency trader.
But, Otunuga noted that investors may direct their attention to China’s third-quarter GDP report which could offer some clarity on how the country is faring.