China stocks tumble despite central bank's move to support economy

Reuters  |  SHANGHAI 

(Reuters) - China's stocks fell sharply on Monday despite Beijing's weekend announcement that it will slash the level of cash that banks must hold as reserves, a sign of underlying investor anxiety over a heated Sino-U.S. trade war.

Monday was the first chance for mainland investors to react to the escalating trade tensions and a sell-off in Hong Kong markets last week after a week-long holiday on the mainland to celebrate

On Sunday, the People's of (PBOC) announced a 100-basis-point cut to banks' reserve requirement ratio, stepping up efforts to support the economy and calm market worries.

"An RRR cut is not enough to counter the impact of the trade war. The economy is quite weak, and I see a growing number of companies selling their assets," said David Dai, of Wisdom Investment Co Ltd, a hedge fund.

"And today's fall is not surprising after weak performance in external markets during the holiday."

The blue-chip CSI300 index was down 2.3 percent at the open and off more than 3 percent by 0215 GMT, while the Composite Index dropped some 2.5 percent.

Hong Kong's Hang Seng slumped 4.4 percent last week as investors worried about the escalating trade row between the and It was off 0.55 percent by mid-morning.

Last week, U.S. Vice intensified Washington's pressure campaign against by accusing of "malign" efforts to undermine ahead of next month's and of reckless military actions in the Sea.

And on Friday, Chinese listed in Hong Kong, including and ZTE Corp, slumped on a report that the systems of multiple U.S. companies had been compromised by inserted by Chinese spies.

China's IT sector fell sharply on Monday, tumbling over 3.4 percent in early trading. Shenzhen-listed shares of tumbled more than 8 percent at market open, before paring losses.

Some analysts saw the central bank's reserve requirement cut as a sign of more easing to come.

"The RRR cut announced today sends a clear easing signal," of America Merrill Lynch said in a research note.

"Timing wise, it suggests policymakers wish to stabilize the market sentiment given the recent stress in financial markets and rising growth concerns as U.S.-China trade tension further escalate."

(Reporting by and John Ruwitch; Editing by and Richard Borsuk)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, October 08 2018. 08:31 IST