By Nathaniel Taplin and Samuel Shen
SHANGHAI (Reuters) - Chinese stocks and the yuan slipped despite the efforts of the authorities on Thursday, as the gloom in global markets obscured signs that China's economy may not be weakening as fast as some investors had feared.
China's central bank set a firmer mid-point rate for the yuan, signalling determination to hold the line against expectations of a sustained depreciation of a currency that has lost 5 percent of its value against the dollar since August.
The yuan, nonetheless, eased at the open.
"The onshore yuan weakened in early trade, taking cues from the offshore yuan. The offshore was down probably because liquidity improved," said a dealer at a foreign bank in Shanghai who also noted strong dollar demand.
Traders said yuan liquidity offshore had been very tight earlier in the week thanks to buying by state-backed banks, acting at the central bank's behest, which pushed overnight borrowing rates in Hong Kong to record highs, making it prohibitivly expensive to bet against the yuan.
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A turbulent start to 2016, with the currency and stock markets tumbling, had stoked concerns that Beijing was losing its grip on economic policy, just as the country looks set to post its slowest growth in 25 years.
Asian share markets weakened across the board on Thursday, hit by steep losses on Wall Street overnight as a rout in oil prices heightened worries about the global economy. [MKTS/GLOB]
China's main stock indexes fell, with the Shanghai Composite Index down 1.1 percent at the midsession interval, and the CSI300 index down 0.6 percent, below their September lows.
The indexes have lost 16-17 percent so far in 2016 and are only a few percent above the lowest points they reached during last summer's crash, when they lost more than 40 percent between early June and late August.
Zhou Lin, analayst at Huaitai Securities, said it was just a matter of time before they fell below that milestone.
"Investors see no good reason to buy stocks now - the yuan is depreciating, the U.S. is raising rates, and the economy is deteriorating. You need real money to support the market, not just rhetoric," he said.
TIGHTER MONITORING
The Shanghai and Shenzhen stock exchanges said late on Wednesday that they have stepped up monitoring to ensure listed companies' major shareholders are abiding by new rules designed to restrict their sales and prevent a build-up of pressure that might lead to another crash.
On Wednesday, China's share markets appeared to take no comfort from December trade data that beat forecasts and tempered some of the fears about the slowdown in the world's second-largest economy.
The better-than-expected performance of exports may have been helped by the depreciation of the yuan, which has fallen around 5 percent against the dollar since August.
The People's Bank of China set the midpoint rate for the tightly managed currency at 6.5616 per dollar on Thursday, firmer than both the previous fix of 6.563 and Wednesday's closing quote 6.5743.
The spot market was changing hands at 6.5898 around midday, 155 pips weaker than the previous close. The spot rate is allowed to deviate 2 percent either side of the daily fix.
The liquidity squeeze in the offshore market has narrowed the gap with the onshore market and on Thursday the offshore yuan was trading 0.2 percent below the onshore spot at 6.6045 per dollar.
(Reporting by Nathaniel Taplin and Samuel Shen; Additional reporting by Wing Wu; Writing by Alex Richardson; Editing by Will Waterman and Simon Cameron-Moore)