Global stock market rally continues despite China retreat

New loans extended by banks slid to 597.8 billion yuan ($91.1 billion, Rs 6.10 lakh crore) in December, against 708.9 billion yuan in November, the People’s Bank of China said.

Subsiding certainty in Mainland China’s administrative decisions has incited shareholders to panic and withdraw from the fiasco economy. The sharp fall in imports goes quite some way to explaining the tumbling prices for commodities and raw materials since China is a major import market for them. The Shanghai Composite has lost around 15% since the start of the year.

China’s central bank ultimately had to intervene as the currency fell 2.7% last week.

Remember that there are two different Chinese currencies – the onshore yuan (CNY) and the offshore yuan (CNH).

Most Asian markets have followed Wall Street’s drop. The onshore yuan can trade up or down within 2% of the bank’s daily guidance.

The offshore yuan traded at 6.5951, weaker by 0.46 per cent from Wednesday, after the PBOC stopped its intervention in the offshore market on Wednesday. Traders said yuan liquidity offshore had been very tight earlier in the week thanks to buying by state-backed banks, acting at the central bank’s behest, which pushed overnight borrowing rates in Hong Kong to record highs, making it prohibitivly expensive to bet against the yuan.

Elsewhere, Hong Kong’s Hang Seng Index was down 1.4 per cent, Australia’s S&P/ASX 200 fell 0.3 per cent and South Korea’s Kospi slipped 1.1 per cent. However, the Shanghai Stock Exchange Composite Index lost another 2.42 percent on Wednesday with overall an nearly 17 percent drop this year.

The situation got worse in July when exports plunged 8.3%, leading to the surprise devaluation in yuan of about 2% in August, in order to maintain competitiveness of the currency in global markets.

The surprising trade data comes as China’s financial markets have erupted in a fresh wave of turmoil, jolting investors around the world.

If that level is breached, SSEC would witness lows not seen since Dec 2014.

Zhou Lin, analyst at Huaitai Securities, said it was just a matter of time before the indexes fell below that milestone.

“You need real money to support the market, not just rhetoric”, he said, adding the government appears to have exhausted its power after last year’s massive market rescue. Significant volatility will then be observed in Chinese markets, which might diffuse in other trading countries also.

China’s economy, an important driver of global growth, is slowing from the rapid expansion of recent decades as officials try to wean it off a reliance on exports and debt-fueled investment in favor of consumer-led demand.

Trade data which showed that exports rose for the first time since June in December also boosted sentiment.