China stocks slip as yuan, economic uncertainty weigh

[SHANGHAI] China stocks fell on Tuesday as investors worried that a recovery in the property sector is losing steam, adding to uncertainty over the economic outlook.

Traders were also keeping a nervous watch on the weakening yuan, which broke through a psychologically important support level late on Monday.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen ended 0.4 per cent lower at 3,248.23 points, while the Shanghai Composite Index lost 0.2 per cent to 3,036.60.

The SSEC property sub-index fell 0.7 per cent.

While China posted slightly stronger-than-expected economic growth for the second quarter on Friday, gains were largely dependant on stronger construction activity fueled by the housing boom and a government infrastructure building spree.

Other data showed property investment cooled in June, while home price rises slowed for the second month in a row.

That has added to continued uncertainty around the economy, capital outflows, weak trade and other factors which have been weighing on the yuan.

The yuan slipped below the 6.7 to the dollar for the first time in more than five years on Monday but recovered some of its losses on Tuesday. Still, most market watchers see it weakening further later in the year.

"The second quarter growth figure came in slightly better than expected, but there is still a lot of uncertainty about the outlook for the second half," said Steven Leung, director at UOB Kay Hian in Hong Kong. "It's not easy for the China market to move above 3,000 without some fundamental improvement."

The Shanghai Composite fell below the key level of 3,000 in early January and has struggled to sustain a recovery above it for most of the year, with a previous breakout stalling in April.

Volumes were relatively tepid, with A share volume in Shanghai at 15.49 billion shares, below an average of around 17 billion over the previous three sessions. In Shenzhen, volumes were 19.99 billion shares.

REUTERS