Asia: Chinese extend losing streak as foreign exchange buying ends

Chinese stocks fell for the third day running amid fears for the country's economic outlook and in sympathy with US losses last week.

With Japanese equity markets closed today for a holiday and little data on which to trade, the main news was the Shanghai Composite Index's 1.7% decline to 3,229.32 at close, the lowest since 30 December.

This was the index's longest retreat since China’s central bank announced an unexpected cut in interest rates in November.

Wu Kan, fund manager at Dragon Life told Bloomberg: “The market has probably entered a correction period as there are sizeable gains for big caps already. We may see the index fall to the 3,100 level.”

It was also reported that, as China moves towards a more market-driven economy, its accumulation of foreign-exchange reserves may be at an end.

China’s stockpile of foreign exchange reserves, the world’s largest, will be $3.5trn to $4trn or lower at the end of 2015, according to 12 of 18 economists in a Bloomberg survey.

“It means the central bank has to find other sources to inject liquidity - it has to cut the required reserves, it has to create more open-market tools,” Xi Junyang, a professor at Shanghai University of Finance and Economics, told the newswire.

Aluminum Corp. of China Ltd. slumped 6.1%, leading declines for metal shares in Shanghai and capping a 12-month surge at 79%.

Poly Real Estate Group dropped 3% as a gauge of developers slid the most among industry groups in Shanghai.

PetroChina, the biggest energy company, fell 3.7%.