China stocks slump 6 percent on fears of further yuan depreciation
HONG KONG Aug 18 (Reuters) - Chinese stocks plunged on Tuesday as the yuan weakened against the dollar, reigniting fears that Beijing may be intent on a deeper devaluation of the currency despite the central bank's comments that it sees no reason for a further slide.
Concerns that companies may pull more money out of China as the economy slows and speculation that the government may begin to scale back its massive support for the country's stock markets also prompted investors to take profits after a run-up in prices over the last few weeks, traders said.
The Shanghai Composite Index closed down 6.1 percent at 3,749.12 points in its biggest daily decline since July 27, snapping a three-day winning streak.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 6.2 percent at 3,825.41.
Volatility in both indexes spiked in the afternoon in what is becoming a mysteriously recurring pattern in China's stock markets since Beijing stepped in to avert a full-blown price crash in early summer.
The yuan fell against the dollar on Tuesday despite a slightly stronger midpoint set by the central bank, and traders expect the currency to remain under downward pressure as the economy struggles.
The People's Bank of China devalued the currency last week by nearly 2 percent, triggering an avalanche of selling by investors who feared Beijing wanted to engineer a much sharper decline to support weak exports. The PBOC was later forced to step into the market and tell state banks to support the currency.
Shares of importers and firms with high U.S. dollar-denominated debt have been under pressure along with Chinese airlines which face higher fuel bills following the devaluation.
The central bank made its biggest injection of funds into money markets in more than six months early on Tuesday, adding to worries that liquidity was tightening as investors moved more capital out of the country. Continuación...