China's yuan extends slide, stocks rebound after fire sale

China stocks also rebounded, partly aided by foreign inflows, after the previous day's record outflows via Stock Connect.

China's yuan extended its decline on October 25, 2022 to a near 15-year low, following Monday's sell-off in Chinese assets by global investors worried about Beijing's policy direction, but Hong Kong and China stocks rebounded amid signs of bargain hunting.

The onshore yuan opened 0.5% lower, and weakened to as much as 7.3090 per dollar, after the People's Bank of China (PBOC) set the official midpoint at the weakest since Feb. 15, 2008. The offshore yuan weakened to as much as 7.3650 per dollar, a new low.

The yuan is suffering from "the double whammy of mounting capital outflow and PBOC's CNY fixing guidance tweak," Mizuho Bank strategist Ken Cheung wrote in a note to clients. He added that the end of the 20th Communist Party Congress "marked the beginning of the mega China sell-offs."

However, the panic selling "was largely driven by sentiment and based on plenty of policy prediction and it could be overdone," he said, referring to fears that under President Xi Jinping's third leadership term, China will sacrifice economic growth for ideology and stick with its zero-COVID policy.

Hong Kong's Hang Seng Index, which plunged 6.4% the previous session, bounced from 13-year lows on Tuesday morning. The Hang Seng Tech Index jumped as much as 6.1% following Monday's market rout.

China stocks also rebounded, partly aided by foreign inflows, after the previous day's record outflows via Stock Connect.

The CSI300 Index rose 0.9% by the lunch break, while the Shanghai Composite Index gained 0.7%.