After Monday's heavy selloff, which saw stock market hitting circuit breaker halting trading for the day, people's Bank of China (PBoC) injected $20 billion capital in banking sector and regulators assured improvement in circuit breaking system to better handle crash. PBoC's move is also intended to keep China's borrowing cost down.
These moves have somewhat stabilized markets for Tuesday. Shanghai Composite dropped more than 3% in early trade, while Shenzhen index was down close to 4.5%. Shanghai Composite recovered from there and was very close to 1% higher, but as of now it is back, marginally in red.
Experts believe, Chinese stock market to keep experiencing heavy swings unless economy turns the corner, improving corporate sector. China's heavy industry is still showing signs of weakness. It would be a real challenge to keep growth rate around 6.5%, Seen by President Xingping as vital.
Stock market wasn't the only asset class to drop yesterday, Chinese Yuan's drop yesterday has been largest since August market turmoil. However, PBoC responded with much smaller depreciation in fixing today than many had expected. PBoC fixed Yuan just 0.21% softer. Its sixth consecutive decline.
However, spread between Offshore and Onshore Yuan is still widening.
