The Chinese markets were volatile for much of September 7 as mainland stock exchanges reopened following a four-day weekend.
The Shanghai Composite traded erratically, but closed down by 2.5% to 3,080.42 points.
The market volatility in China came as the country’s National Bureau of Statistics revised its annual economic growth rate for 2014 to 7.3%, down from 7.4%.
Hong Kong’s benchmark Hang Seng index closed down 1.2% to 20,583.52.
Mainland shares have fallen 40% since mid-June when the sell-off began, while Chinese regulators continue to take more steps to stabilize erratic trading.
China’s central bank governor, Zhou Xiochuan, told financial leaders at the G20 summit over the weekend that the markets had almost completed their correction after a steep rise in the first half of the year.
Photo Getty Images
“The stock market adjustment is already roughly in place and financial markets can be expected to be more stable,” Zhou Xiochuan said in a statement from Turkey.
Other Asian markets were mixed on September 7 despite stocks in the US, which headed lower on before weekend after US jobs figures were released.
Friday’s much-anticipated jobs figures showed unemployment fell to 5.1% last month, the lowest since April 2008.
The jobs report is the last before the Federal Reserve meets later this month to decide whether to increase interest rates.
Japan’s benchmark Nikkei opened lower on September 7, down 0.65%, but finished the day closing up 0.38% at 17,860.47.
In Australia the S&P/ASX 200 closed down 0.2% at 5,030.40, while South Korea’s Kospi benchmark index closed down 0.15% at 1,883.22 points, after closing down 1.5% on September 4.
In an effort to calm stock markets after two days of turmoil, China’s central bank has cut its main interest rate by 0.25 percentage points to 4.6% to boost growth in the country’s economy.
It is the fifth interest rate cut since November and will take effect on August 26.
The People’s Bank of China’s move has boosted global share prices further, with Wall Street’s Dow Jones index opening more than 1.7% higher after the move.
In mid-afternoon European trading, London’s FTSE 100 was up almost 3%, while Germany’s Dax and the Paris Cac were ahead nearly 5%.
Other European markets, including Lisbon, Madrid, Moscow and Milan, were all sharply higher.
The People’s Bank said that the interest rate cut was to reduce “the social cost of financing to promote and support the sustainable and healthy developments of the real economy”.
The Chinese central bank also acted to increase the flow of money in the economy by cutting the amount of cash banks must keep in reserve, effectively freeing them to lend more cash.
Its move was broadly welcomed by economists.
A research note from JP Morgan stated: “China’s decision to cut… will be regarded by many investors as overdue. The litmus test will come overnight, however, and the efficacy of the… cut in boosting the domestic stock market.”
The Chinese authorities have taken a number of steps to help stem stock market losses since the market began a series of heavy falls in June.
Earlier, China’s falling stock market had hit markets around the globe on August 24, and – although Asian markets were again hit overnight – European stocks had already opened in a more optimistic mood on August 25.
The main Shanghai Composite index closed Tuesday’s session down 7.6% at 2,964.97 points. Japan also saw more sharp falls, sending Tokyo’s Nikkei index down 4%.
The global sell-off has been driven by fears that China’s slowing growth means less business for everyone else.
China’s booming economy of the last 30 years has seen the country suck in supplies of raw materials for manufacturing and, increasingly, manufactured and luxury goods from other countries.
Chinese stocks were flat on August 14 as the central bank raised the trading range of the yuan.
China’s central bank set the yuan rate at 6.3975 per dollar compared to Thursday’s close of 6.3982.
The rate is set daily and allows a 4% fluctuation – over the past week, the bank had guided the yuan to a record low sparking fears of a currency war to help lagging Chinese exports.
The benchmark Shanghai Composite was flat at 3,947.47 points.
Following the mainland’s lead, Hong Kong’s Hang Seng also remained unchanged, trading flat at 24,005.92.
Japanese shares traded lower with the Nikkei 225 index closing 0.4% lower at 20,519.45 points.
Investors are anticipating next week’s release of Japan’s economic growth for the past three months.
In Australia, the S&P/ASX 200 also fell by 0.5% finishing at 5,360.90 points as investors took a cue from Wall Street’s flat close and the ongoing uncertainty over the yuan.
China’s currency is important to Australia as it is the main export market for the country’s natural resources.
In South Korea, the Kospi index remained closed on August 14 as the country will mark a national holiday on August 15.
The Chinese yuan has been devalued to its lowest rate against the US dollar in almost three years.
China’s central bank said the move was a “one-off depreciation” of 1.9% in a move to make the exchange rate more market-oriented.
It comes in the wake of a string of weak economic data from the world’s second largest economy.
At the weekend, China reported a sharp fall in exports and a slide in producer prices to a near six-year low in July.
Exports fell by 8.3% in July, far worse than expected and the producer price index was down 5.4% from a year earlier.
Photo Reuters
The midpoint for the yuan is now set at 6.2298 to $1, up from 6.1162 yuan on August 10.
The People’s Bank of China (POBC) manages the rate through the official midpoint, from which trade can rise or fall 2% on any given day.
Until now, it had been determined solely by the central bank itself.
Making the rate more market-based will mean the midpoint will now be based on overnight global market developments and how the currency finished the previous trading day.
The POBC’s move comes amid speculation that China is preparing to widen the trading band for the currency from the current two percent range.
China has long kept tight control of the yuan value on concerns over financial volatility and losing its policy control.
Yet it is also under pressure to reform its currency policy as it pushes to become one of the International Monetary Fund’s “special drawing rights” (SDR) reserve currencies.
These are currencies which IMF members can use to make payments between themselves or to the Fund.
Asian equities outside of China slipped on the news as investors weighed the implications of the surprise move.
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