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Chinese stocks decline longest in three years

Chinese stocks fell for a sixth day, with the benchmark gauge poised for its longest losing streak since December 2013, as tightening liquidity sends tremors through the nation’s financial markets.

The Shanghai Composite Index fell 0.5 per cent to 3,087.73 at 1:04 p.m. local time. Brokerages tumbled, led by Guoyuan Securities Co., while Jiangxi Copper Co. paced losses by commodities producers as metal prices declined. An index of Shenzhen equities slid 0.7 per cent after posting the steepest intraday plunge in 10 months on Monday.

China’s shares have slumped since the start of December along with the nation’s bonds as monetary conditions tightened. The central bank has been driving up funding costs in order to avert asset bubbles. At the same time, a weakening Yuan may also be prompting policy makers to keep rates elevated in order to support the exchange rate.

“Liquidity has been tight for some time following the government’s push to lower leverage,” said Liu Yuhui, chief economist at Tianfeng Securities Co.

The Hang Seng Index added 0.4 per cent, while the Hang Seng China Enterprises Index gained 0.2 per cent.

The Shenzhen Composite dropped as much as 6.1 per cent last session before paring losses to 3.6 per cent. The ChiNext gauge of mostly small-cap technology shares has fallen for nine days, dragging its relative-strength index to the lowest level in four years. The correction will continue as the accelerating pace of initial public offerings may lead to a supply glut, Credit Suisse strategists led by Li Chen wrote in a note.


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