Airlines, real estate firms drag down Chinese stocks

Chinese mainland stocks gave up early gains to close lower on Monday, as an expected reserve requirement ratio (RRR) cut was largely offset by lingering trade war fears, and as a weakening yuan pushed lower real estate and airline shares.

The blue-chip CSI300 index fell 1.3 percent to 3,560.48 points, while the Shanghai Composite Index slid 1.1 percent to 2,859.34 points.

The US Treasury Department is drafting curbs that would block firms with at least 25 percent Chinese ownership from buying US companies with “industrially significant technology,” a government official briefed on the matter said on Sunday.

Policymakers in China moved fast to temper any potential economic drag from the trade dispute with the US, with the central bank on Sunday saying it would cut the amount of cash that some banks must hold as reserves by 50 basis points. The reduction in reserves, the third by the central bank this year, had been widely anticipated by investors and is aimed to accelerate the pace of debt-for-equity swaps and spur lending to smaller firms.

For the day, real estate and airline shares led the losses amid a falling yuan.

China’s yuan fell to a 5-1/2-month low against the US dollar, effectively erasing all of this year’s gains, after the central bank freed up for lending some capital that commercial banks have to hold as reserves.

Real estate firms tumbled 4.9 percent, as a weakening yuan raised fears of capital outflow that could weigh on assets prices.