Xiaping, China - The worst start for Chinese markets in two decades showed no signs of letting up after the central bank cut its yuan reference rate by the most since August, sparking a selloff in stocks that forced the $6.6 trillion market to shut early.
China’s CSI 300 Index plunged 7.2% before bourses were halted by circuit breakers in the first half hour of trading, while the onshore yuan weakened 0.6% versus the dollar to a five-year low. The People’s Bank of China cut its reference rate on Thursday for an eighth straight day, fuelling concern that tepid economic growth is prompting authorities to guide the currency lower.
While a weaker yuan would support China’s flagging export sector, it also boosts risks for the nation’s foreign-currency borrowers and heightens speculation that the slowdown in Asia’s biggest economy is deeper than official data suggest. An unexpected yuan devaluation in August roiled global markets on concern the move would trigger a currency war and exacerbate deflationary pressures in the developed world.