Worries linger that China’s domestically traded A-shares are overvalued when compared with global levels. In addition, there are concerns about whether China’s volatile market will adapt to international best practices.
Meanwhile, financial stocks across the region also faced selling pressure, with local weakness exacerbated by dovish comments from central banks in the U.K. and U.S. Japan’s Topix bank subindex was 1% lower, while the Hang Seng finance subindex was down 8%. In Australia, the ‘big four’ banks — Westpac Banking (WBK) , Commonwealth Bank of Australia (CBA.AU) , National Australia Bank (NABZY) , and Australia and New Zealand Banking (ANZ.AU) — fell between 1.2% and 2.1%.
In currencies, the offshore yuan gave up most of the gains accrued in the wake of MSCI’s decision. The U.S. dollar-yuan was recently trading at 6.8206, compared with 6.7164 before the MSCI news, a near nine-month high for the Chinese currency.
Speculation that demand for the yuan is coming from investors seeking to buy Chinese shares is premature, notes Stephen Innes, head trader for Asia at Oanda. Investors are “laying the groundwork,” but any actual buying of either the yuan or Chinese shares is a long way off,