The WSJ reports today China's stock market had a big correction as fear of a domestic credit
squeeze, pushed Shanghai -5.3%.
"The selloff was sparked by further signals over the weekend that China's cash crunch would persist, after a commentary by state-run Xinhua suggested that the government won't be taking any action soon. In addition, the People's Bank of China made no direct reference to the recent surge in borrowing costs for banks, at the same time saying that it will maintain prudent monetary policy.
squeeze, pushed Shanghai -5.3%.
"The selloff was sparked by further signals over the weekend that China's cash crunch would persist, after a commentary by state-run Xinhua suggested that the government won't be taking any action soon. In addition, the People's Bank of China made no direct reference to the recent surge in borrowing costs for banks, at the same time saying that it will maintain prudent monetary policy.
China's medium sized banks continued to suffer heavy losses, despite a drop in the interbank lending rate, as the market was worried about their large exposure to wealth management products. Fitch Ratings estimates that more than 1.5 trillion yuan worth of these products will mature in the last 10 days of June.
China Minsheng Banking Corp. 600016.SH -9.95% plunged 9.9% in Shanghai andIndustrial Bank 601166.SH -9.98% skidded 9.9%.
China's broader indexes were weighed by financial concerns, with the Shanghai Composite crashing 5.3% to 1963.24 in the mainland. Hong Kong's benchmark Hang Seng Index fell 2.2% to 19813.98, while the city's measure of Chinese companies, the Hang Seng China Enterprises Index, dropped by 3.2% to 8938.63.
The fear over the banking system also translated into a shock for the local currency, as the yuan fell to 6.1411 to the dollar, compared with 6.1343 late on Friday".
