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No Fireworks for Chinese Stocks After Week-Long Break

Updated on
  • Shanghai Composite falls on first day after week-long break
  • PBOC increases costs of some shorter-term repo agreements

Chinese stocks fell on the only trading day of the week as the central bank raised interest rates in open-market operations and international concern grew over President Donald Trump’s policies.

The Shanghai Composite Index retreated 0.6 percent to 3,140.170, led by energy and financial shares. The Hang Seng China Enterprises Index slumped 1.6 percent in Hong Kong while mainland financial markets were closed for the Lunar New Year holidays, and fell 0.1 percent on Friday. The People’s Bank of China boosted the cost of some shorter-term repurchase agreements for the first time since 2013.

The central bank has been tightening cash supply since August to curb leverage in the financial system and support the exchange rate. Trump’s barrage of executive orders is fueling concern he will follow through with a campaign promise to raise tariffs on Chinese imports. His moves in the past week, ranging from a travel ban for some countries to assertions that other nations are manipulating currencies, unsettled global financial markets and helped propel the Bloomberg Dollar Spot Index to an 11-week low.

“Trump has implemented some of his campaign promises very quickly, and he’s said he will raise tariffs on Chinese imports to 45 percent," Daniel So, a strategist at CMB International Securities Ltd. in Hong Kong, said on Thursday. "Now it looks like it might not just be empty talk. But the market may not be scared so soon.”

  • The People’s Bank of China raised the costs of seven-, 14- and 28-day reverse repurchase agreements by 10 basis points each to 2.35%, 2.5% and 2.65%, respectively, according to a statement posted on its website. This is the first increase since 2013 for the two shorter tenors, and the first such move since 2015 for the 28-day contracts
  • The PBOC also increased the rate on funds lent via its Standing Lending Facility to 3.1% from 2.75%, according to people familiar with the matter who declined to be identified because they’re not authorized to speak publicly.
  • Gauges of energy and financial stocks dropped more than 1% on China’s CSI 300 Index of companies listed in Shanghai and Shenzhen. Shaanxi Coal Industry Co. slid 2.3%, while China Pacific Insurance (Group) Co. paced declines by insurers
  • Commodity shares slid after recent rallies. Jiangxi Copper Co., which surged 20% last week, sank 3.4%; Aluminum Corp. of China Ltd. posted its biggest loss since Jan. 12. Metal prices declined after weaker-than-expected factory data, with China’s January manufacturing purchasing managers’ index falling to 51, below analyst estimates of 51.8
  • The Hang Seng Index dropped 0.2%, led by Want Want China Holdings Ltd. and China Shenhua Energy Co.
  • The onshore yuan rose 0.1% to 6.8720 against the dollar, while the offshore rate dropped 0.2% to 6.8232
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