Stocks across China dropped after the central bank tightened financial conditions and an official raised concerns that loose liquidity could inflate an asset bubble.
The People’s Bank of China early on Tuesday withdrew Rmb78bn ($12bn) of net liquidity through its open market operations, a process through which the central bank and banking system lend to one another. The overnight repo rate, an interbank benchmark, jumped to more than 2.8 per cent — its highest level since late 2019 — from 2.5 per cent the previous day.
In Hong Kong, the Hang Seng index — which has been boosted this month by record-breaking daily volumes of buying by mainland investors — fell by more than 2.4 per cent. Mainland China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks dropped 2 per cent.