Chinese shares started lower on Monday as trading resumed after the long Lunar Holiday break and investors caught up with wild swings in global markets, while Beijing took another swipe at devaluation talk with a strong fix for the local currency.
The Shanghai Composite Index eased 2.6% in early trade in its first session since Feb. 5, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen lost 2.4%.
The moves were relatively modest given Japan’s Nikkei alone sank 11% last week.
The People’s Bank of China (PBOC) fixed its yuan at the highest rate in over a month as it continued efforts to stem speculation of an imminent devaluation.
Reflecting the recent retreat in the US currency, the Monday fix of 6.5539 yuan per dollar, a reference point for trading, was much stronger than the 6.5314 set before the holiday.
The news provided a fillip to risk appetites across Asia and nudged the safe-haven Japanese yen lower.
In an interview over the weekend, PBoC Governor Zhou Xiaochuan warned speculators should not be allowed to dominate market sentiment regarding China’s foreign exchange reserves and it was quite normal for reserves to fall as well as rise.
Zhou said there was no basis for the yuan to keep falling, and China would keep it stable versus a basket of currencies while allowing greater volatility against the US dollar.
The comments come after China reported economic growth of 6.9% for 2015, its weakest in 25 years, while depreciation pressure on the yuan adds to the case for the central bank to take more economic stimulus measures over the near-term.
Trade figures for January are due on Monday and any disappointment would be a setback to risk sentiment globally, adding to worries about a global economic slowdown.
Median forecasts were for exports to dip 1.9% compared to a year earlier, with imports down 0.8%. The data tend to surprise, however, and estimates varied hugely from sharp falls to big rises.
Figures out over the weekend suggested there was still life in the Chinese consumer with retail sales growing 11.2% during the week-long Lunar New Year vacation compared with the same holiday period last year.
The holiday is especially important for retailers, which vie for customers by launching promotions and discounts. Millions of people take time off work to travel and generally spend more than usual during the break.
Jan exports, imports shrink much faster than expected
China’s exports fell 11.2% in January from a year earlier and imports tumbled 18.8%, both far worse than expected, putting pressure on policymakers to take further action to put a floor under the slowing economy.
The fall in January exports marked the seventh straight month of decline, while the decline in imports was the 15th month.
China posted a better-than-expected trade surplus of $63.3 billion in January, data released by the General Administration of Customs showed on Monday, versus $60.09 billion in December.
Analysts polled by Reuters had expected exports to fall 1.9%, after slipping 1.4 percent in December, while imports had been expected to drop only 0.8 percent, following a 7.6% slide in December. The poll forecast a trade surplus of $58.85 billion.
“It was a steeper than expected fall in trade numbers,” said Chester Liaw, an economist at Forecast Pte Ltd in Singapore.