Shanghai index cuts losses, other Asian markets lower

China’s stocks wiped out gains spurred by an unprecedented government campaign to prop up prices amid weakening economic data and signs of capital outflows.

The benchmark Hang Seng Index lost 1.53 percent, or 347.85 points, to finish the day at 22,409.62 – its lowest since May 2014 – on turnover of HK$118.28 billion (US$15.26 billion).

China stocks extended losses on Thursday following volatile trading the previous day.

Elsewhere, U.S. equity markets pointed to a moderately lower open as investors looked ahead to the release of minutes from the Federal Reserve’s latest policy meeting later in the session for further hints on the timing of a U.S. rate hike. “Short-term sentiment is pretty weak”.

A timely warning came from Oxford Economics, a United Kingdom advisory firm specializing in global forecasting and quantitative analysis: Korea’s exports, in heavy competition with China’s, would drop by 1.14 percent next year – twice as much as the U.S., Japan and Germany – if the yuan’s value falls by 10 percent. The Shanghai gauge has lost 11 per cent this week.

The index is at its lowest point since December and down some 20 percent from its April peak – approaching a bear market – hit by falls on the mainland and concerns a weaker yuan could hurt local companies. The slump threatens to undermine confidence in President Xi Jinping’s ability to manage the economy.

The Caixin preliminary manufacturing purchasing managers index for August fell to 47.1 compared with a final reading of 47.8 in July. Numbers below 50 show a contraction.

China’s currency has held steady for the past several days in the wake of the tumult sparked by the central bank’s move to devalue the yuan last week. “That is worrying for the global economy”.

Materials stocks (.SPLRCM) fell 1.2 percent as copper (CMCU3) touched a six-year low on persistent concerns about slowing growth in China.

The devaluation of China’s currency, the Yuan, last week took many by surprise, and the Chinese stock market has continued to see big fluctuations despite efforts by Beijing to calm markets. Natural gas dropped by half a cent to $2.71 per thousand cubic feet.

“State forces or measures are the main forces supporting the market right now”.

Regulators have said that CSFC, which was tasked with buying stocks and proping up prices during the recent market sell-off, would continue to play a stabilising role in the market. China’s rail freight volume, an indicator of economic activity, plunged 10.9% year over year to 278.89 million ton in July, pointing to plunging demand for major commodities, including coal and metals, according to data from the National Development and Reform Commission (NDRC), reported ShanghaiDaily.com.

“The concern over the weak economy is definitely there”, Phillip Securities analyst Chen Xingyu told AFP.