China shares fall despite central banks' liquidity injection

Airlines are particularly hit as the yuan continues to depreciate while markets are already clouded by uncertainty over a possible Sino-US trade war. 

China's stock markets fell today despite the central bank announcing the release of US$108 billion to boost lending for small businesses, with airlines particularly hit as the yuan continued to depreciate.

The markets opened today higher after the People’s Bank of China cut the required reserve ratio by 50 basis points for some banks on Sunday.

During the afternoon session the markets erased early gains, with the Shanghai Composite Index falling 1.05 percent or 30.42 points to close at 2859.34.

The Shenzhen Component Index shed 0.90 percent to 9,324.83 points, while the Nasdaq-style ChiNext enterprise board dipped 0.72 percent to close at 1,538.57.

Airlines flew into turbulence when the yuan fell for an eighth day. Air China Ltd, one of the country's top three airlines, dropped by the maximum cap of 10 percent to close at 9.78 yuan.

The market was already clouded by the uncertainty over a possible full-blown Sino-US trade war and a tit-for-tat dispute between the world’s largest two economies last week. On Sunday, US President Donald Trump called on other countries to end all trade barriers on his Twitter account, according to a CNBC report.

Gao Ting, head of China Strategy at UBS Securities, said in his latest report that the firm believed A-share investors were overly pessimistic and overlooked fine-tuning policies like the targeted RRR cuts.

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