China's stock markets tumble

China’s A-share markets sank on Monday as investors showed little appetite for risk amid a series of unfavorable factors. 

Most of sectors suffered losses, while gold and farming stocks firmed.

The sharp weakening of the Chinese yuan prompted equities to retreat. The benchmark Shanghai Composite Index fell by 1.62 percent, or 46.34 points to finish at 2,821.50.

The smaller Shenzhen Component Index declined by 1.66 percent at around 8,984.73 points, while the ChiNext Index dropped 1.63 percent to finish at 1,531.37 points.

The combined turnover of the two bourses came to 416.1 billion yuan (US$59.06 billion), down from the volume of 454.9 billion yuan during the previous trading day.

Most of sectors suffered declines, with leisure service companies, property developers and automakers among the main losers. Shares of Zeus Entertainment shed 5.63 percent to stand at 3.02 yuan a share.

Conversely, investors flocked to safe haven assets such as Japanese yen and gold, sending shares such as Shandong Gold Group Co Ltd moving broadly higher.

On Monday, the Chinese yuan breached the symbolic 7 handle — a closely watched barrier — against the US dollar.

In the afternoon of Asian trading hours, the onshore Chinese yuan traded at 7.0304 against the Greenback, while the offshore yuan changed hands at 7.0807 against the US dollar.

The Chinese currency last cracked the 7 level against the US dollar during the global financial crisis in 2008.

The People’s Bank of China, the central bank, set the yuan’s midpoint at 6.9225 against the dollar on Monday, its weakest level since December 2018.

Following the declines, PBoC said it is confident of being able to keep the yuan basically stable. The central bank largely attributed the currency’s sharp weakening to trade protectionism and tariffs on Chinese goods.

Analysts and economists advised investors to maintain a calm, reasonable and balanced opinion about the decline of the yuan, and wait to see further developments on its movements.

“The market may worry about the outflow of foreign capital due to the devaluation of the yuan, and yuan-denominated assets may incur some exchange rate losses, but this will be more of a short-term impact,” Qiu Yu, an analyst at Sinolink Securities, was quoted as saying by Caixin.com.

Qiu also warned investors to be alert of being impacted by the underperformance of listed companies as the semi-annual earnings season would come in late August.