China Stocks Extend Losses as the Yuan Approaches Record Low

Li Chen
11 Apr, 2024
Hong Kong

 Stocks in Shanghai and Hong Kong traded lower ahead of the release of international trade data and protracted weakness in the property market. 

Stocks in China have struggled to hold on to gains, powered by the government's market intervention, after the latest economic data highlighted a fragile economic recovery and persistent weakness in the residential property market. 

Investors are worried that the central government may force several large state-controlled real estate companies to merge and provide minimum financial support, which may force bond holders to shoulder most of the losses. 

Market sentiment was further dented, after the yen drifted to its new 34-year low against the U.S. dollar, putting more pressure on the Chinese yuan. 

The Chinese yuan is trading at a five-month low of 7.264 against the U.S. dollar in Shanghai after the People's Bank of China set the midpoint rate at 7.0986, higher than market expectations. 

The Chinese yuan is drifting towards a record low after new foreign direct investment flow collapsed in 2023 following rising tensions with the U.S. and foreign investors staying away from Chinese stocks in Hong Kong and Shanghai. 

China's foreign direct investment in 2023 plunged 80% from a year ago to $33 billion, the lowest level since 1993. 

China's exports are likely to contract around 2% from a year ago in March, after rising 5.6% in the January-February period, according to an informal survey consensus estimate of five economists in Shanghai. 

The CSI 300 index declined 0.3% to 3,494.37, and the Hang Seng index dropped 1.7% to 16,799.67. 

For the week, the CSI 300 index declined 1.7% and the Hang Seng index dropped 0.8%. 

Longfor Group, China Resource Land, China Vanke, New World Development, and China Overseas Land and Development declined between 3% and 5%. 

Electric vehicle makers declined due to worries about price competition and lukewarm sales growth expectations. 

BYD, Li Auto, Xpeng, and Nio declined between 3% and 6%, while Xiaomi bucked the trend to trade up 2%.