China’s stocks tumbled to the lowest levels in 13 months amid concern capital outflows will accelerate as the economy slows and support for the yuan eats into the nation’s foreign reserves.
The Shanghai Composite Index plunged 6.4 percent to 2,749.79 at the close. All industry groups slumped, ranging from commodity shares to new-economy sectors such as technology. Besides data showing outflows hitting an estimated $1 trillion last year, investors were concerned about a possible liquidity squeeze even as the central bank flooded the financial system with cash before the upcoming Chinese new year holiday. Some of the nation’s most accurate forecasters said the stock index may not bottom until it falls to the 2,500 level.
‘It’s an issue about confidence and there’s no confidence in the market now,’ said Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai. ‘The depreciating yuan and slowing economic growth have been haunting the market for a while. We are less than two weeks from the spring festival and it seems that most investors are in no mood to trade any more.’
This post was published at David Stockmans Contra Corner by Bloomberg Business ‘ January 26, 2016.
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