China’s central bank injects most funds in three years

Chinese shares plunged more than 6 per cent to 14-month lows on Tuesday after oil prices dropped again, reviving concerns about global growth and prompting a sell-off in the world’s equity markets.

But trading volumes in Shanghai hit two-week lows, underscoring the fragility of investor confidence and casting doubt on the sustainability of the rebound.

Most sectors gained, with an index tracking energy stocks jumping 2.3 percent.

The benchmark Shanghai Composite Index ended down 6.4 per cent after a late selling frenzy at 2749.79 points, its lowest close since December 1, 2014.

We’ve seen another stampede driven by panic.

The Tuesday slump in Asia followed a rough start in USA markets on Monday.

Analysts said sentiment was hurt by big losses on Wall Street, where all three main indexes sank more than one percent owing to tumbling oil prices.

Investors remain wary about further weakness in the yuan, too, despite assurances from Beijing that it has no intention of pushing it lower to gain a competitive advantage. The People’s Bank of China set its daily fixing in Shanghai little changed from Monday at 6.5548.

China’s yuan stayed flat against the dollar on Tuesday as the central bank kept holding the line, and traders expected the stability of the yuan to last until the Chinese Lunar New Year.

“As the (yuan) exchange rates calm after recent interventions, stocks are likely to stabilise, and can even stage a technical reprieve in the near term”, Hao Hong, managing director, research at BOCOM International said in a report.

Liquidity conditions often tighten before the New Year holiday week, which begins on Lunar New Year’s eve on February 7, and the central bank usually injects large amounts of cash into the money market to keep interest rates steady.

They are the first under new rules that drop a requirement for subscriptions to be paid in advance, a move aimed at curbing market volatility. The depreciating yuan and slowing economic growth have been haunting the market for a while.