China shares extend losses

China shares extended losses this morning, sinking to their lowest levels since early 2009, with the financial sector again hard hit on expectations that an official crackdown on easy credit and tighter funding conditions will persist.

At 03.25 GMT, the CSI300 of the leading Shanghai and Shenzhen listings was down 4.5 per cent at its lowest since February 2009.

The Shanghai Composite Index slid 3.5 per cent to its lowest since January 2009.

Today’s losses came despite money market rates easing for a third-straight session.

The benchmark seven-day repo rate opened at 5.73 per cent today, down from 7.53 per cent at yesterday’s close and an all-time high of 11.62 per cent on Thursday.

At its open market operations window today, where it can inject or withdraw cash from the banking system, the PBOC opted to do nothing.

It also did not auction any central bank bills, which would have taken funds from the market.

“Overall, panic over a liquidity squeeze still lingers in the market, but market sentiment is slightly better than late last week,” said a money market dealer at an Asian bank in Shanghai.

Banks are being hit the hardest now, but investors are also worried about the broader impact on China’s economic growth, its top trading partners such as Japan and South Korea and the world economy at large.

Reuters