People walk past a screen displaying the Hang Seng index at Central district, in Hong Kong, China Dec 6, 2023. REUTERS/Tyrone Siu/File photo
SHANGHAI -China’s blue-chip stocks slumped to an almost five-year trough on Wednesday while the Chinese yuan extended losses, with market sentiment fragile after ratings agency Moody’s cut China’s credit outlook.
Moody’s issued a downgrade warning on China’s credit rating on Tuesday, saying costs to bail out local governments and state firms and control its property crisis would weigh on the world’s second-largest economy.
READ: Moody’s cuts China credit outlook to negative
China stocks opened down before giving up earlier losses, with the CSI300 Index touching its lowest level since Feb. 2019.
The Hang Seng Index, meanwhile, rebounded roughly 0.6 percent in morning trade.
“The CSI300 index was hit the hardest in terms of valuation, as the index gets more allocations from foreign investors. Adding the impact of Moody’s downgrade, the index may find a bottom and rebound soon,” said Pang Xichun, research director at Nanjing RiskHunt Investment Management Co.
Foreign capital recorded a net inflow via the northbound trading link as of midday, after three consecutive sessions of outflows.
China’s yuan slipped against the dollar on Wednesday even as major state-owned banks continued their efforts to stabilize the currency.
READ: China state banks seen selling US dollars to prop up yuan -sources
The spot yuan rate opened at 7.1570 per dollar and was changing hands at 7.1567 as of 0255 GMT, 87 pips weaker than the previous late-session close.
China’s major state-owned banks stepped up U.S. dollar selling forcefully after the Moody’s statement on Tuesday, and they continued to sell the greenback on Wednesday morning, Reuters reported.