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China Stock Market Implosion Continues

The following originally appeared in Bloomberg:

Chinese stocks in Hong Kong fell to the lowest level in four years as mainland shares plunged, forcing an early halt to trading for the second day this week, after the central bank cut its yuan reference rate by the most since August.

Hong Kong’s Hang Seng China Enterprises Index slumped 3.3 percent at 1:13 p.m., heading for the lowest close since Oct. 6, 2011. Trading of shares and index futures in the mainland was halted by automatic circuit breakers from about 9:59 a.m. after the CSI 300 Index slid more than 7 percent. The People’s Bank of China cut its reference rate on Thursday for an eighth straight day, fueling concern that tepid economic growth is prompting authorities to guide the currency lower.

“The yuan’s depreciation has exceeded investors’ expectations,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co. “Investors are getting spooked by the declines, which will spur capital outflows.”

The yuan weakened 0.6 percent to 6.5928 per dollar at 12:20 p.m. in Shanghai. The currency rallied from early declines in offshore trading, strengthening 0.4 percent in Hong Kong amid speculation the central bank propped up the exchange rate after setting a weaker fixing that sent the currency tumbling.

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