Stocks wobble, then recover after Chinese currency weakens

After Tuesday, again on Wednesday for the continued second day the stocks in China dropped.

The Hang Seng index rose 0.4 percent, to 24,018.80, while the China Enterprises Index gained 0.4 percent, to 11,080.92 points.

The 7 per cent government target is what I am constantly focusing on, and it is only if GDP growth fell below this level that I believe the recent declines in the Shanghai Composite might have a more widespread impact globally. In response, they sold stocks in companies that do significant business in China: YUM! Germany’s DAX dropped 3.3 percent, France’s CAC 40 dropped 3.4 percent, while Britain’s FTSE 100 lost 1.4 percent. “We are picking up stocks which potentially would benefit from weaker currencies, and selling down some”. Brands and Tiffany each dropped 4 percent.

The onshore yuan fell yesterday to as much as 1.9 percent weaker than the fixing, near the 2 percent limit of its permitted daily trading range, even as the PBOC intervened to back the currency via banks around midday local time.

China’s government said its moves were attempts to make the country’s exchange rate more responsive to the market. “Now that this Rubicon has been crossed, keen attention should be paid to any other significant moves to prop up the Chinese economy”, Angus Nicholson, a market analyst at IG, said in a commentary.

But Shanghai had added 0.83 percent in mid-afternoon trade while Hong Kong was up 0.71 percent. Australia’s S&P/ASX 200 advanced 0.6 percent to 5,411.80.

In the energy sector, JX Holdings and Inpex elevated 1.8 and 1.3 percent, respectively.

The currency slid as much as 2 percent to a four-year low of 6.4510 per dollar in Shanghai, before recouping about half its loss in the final 15 minutes of trading. The European markets were down and the U.S. bourses were mixed but little changed – and the Asian markets figure to follow the latter lead. The dollar slipped to $1.1172 for every euro and weakened to 124.14 yen.

“The yuan devaluation has given rise to a need to re-evaluate our portfolio mix”, Geoffrey Ng, director at Fortress Capital Asset Management Sdn.in Kuala Lumpur, which oversees about 1 billion ringgit ($250 million), said by phone.

METALS: Precious and industrial metals futures ended broadly higher, following a slump the day before in the price of copper.