China slides as yuan falls past 6.9 a dollar

Bloomberg

China’s equities and currency slid, with the yuan weakening past 6.9 a dollar for the first time since May 2017 and losses in tech stocks spiraling into a broad selloff.
The Hang Seng China Enterprises Index fell 2 percent at the close for its fourth day of losses. Tencent Holdings Ltd. rattled equities after surprising investors with its first profit drop in at least a decade, sending MSCI’s emerging-market benchmark down 1.3 percent. Shanghai’s benchmark stock gauge and the small-cap ChiNext Index also retreated at least 2 percent.
“It’s really just a lack of confidence forcing the selloff in the yuan, and of course there’s the double whammy coming from the US-China trade tension and the latest negative news from Turkey,” said Jingyi Pan, Singapore-based market strategist at IG Asia Pte. “The Chinese market is coming under a little bit more stress and a lot has to do with the currency. Whether that will carry on — the market has to see someone step in to do something about it. At this point, we don’t see it happening yet.”
China’s currency has slumped about 7.6 percent over the past three months as the worst performer in Asia amid China’s trade dispute with the US and a slowing economy. Investors got a reminder of the economic troubles China faces on Tuesday, as data showed factory output, retail sales and credit creation in July all trailed estimates.
Tencent fell 3.6 percent to extend its four-day slump to nearly 10 percent. The mood on the Chinese company has soured amid concern over its revenue prospects, with Goldman Sachs Group Inc. becoming the latest to cut its
price target, though analysts still overwhelmingly rate the stock a buy.
In a fresh blow, ordered Tencent to shut down Monster Hunter: World from its PC downloads service just days after its debut, while the country’s watchdogs China are said to have frozen approval of new game licenses. That contributed to a 19 percent drop in mobile gaming revenue from the first quarter.
The options market is implying a share price move of
5.1 percent in either direction after Tencent’s earnings report, according to data compiled by Bloomberg. That would be its biggest post-results reaction since August 2015, when the stock rallied 6.8 percent.
Hong Kong’s stocks have also been hit, as the Hang Seng Index lost 1.6 percent for its lowest close since August last year. The city’s currency has also fallen to the weak end of its trading band, prompting the city’s monetary authority to defend the peg to the dollar by buying $275 million during New York trading hours. It was the first such intervention in three months.
Howard Lee, deputy chief executive of the Hong Kong Monetary Authority, said that the city can cope with market volatility and challenges of capital outflows.