Chinese yuan weakens against U.S dollar, shares tumble

The weaker yuan hit shares of airliners, as a strong greenback would increase the value of liability of a sector burdened with heavy dollar borrowings.

China shares fell on Friday morning in choppy trade as investor excitement over government support measures faded amid renewed weakness in the yuan.

The CSI300 index ended the morning session down 1.04 per cent at 3,161.20, while the Shanghai Composite Index lost 0.58 per cent to 2,588.66. ** Hong Kong's benchmark Hang Seng index dropped 1.41 per cent.

The Chinese stock markets jumped over 4 per cent on Monday in response to a chorus of support from top government officials over the weekend, but have given up most of the gains. The CSI300 is currently up 0.84 per cent for the week.

"There's still a lack of confidence, and the bearish mindset remains in place," said Yang Hongxun, Shanghai-based analyst at investment consultancy Shandong Shenguang. He pointed to headwinds including a weaker yuan, volatile global markets, lingering concerns over pledged shares and domestic economic growth.

The Chinese yuan continued its slide against the U.S. dollar on Friday, falling below the psychologically key level of 6.96 on the onshore spot market.

The weaker yuan hit shares of airliners, as a strong greenback would increase the value of liability of a sector burdened with heavy dollar borrowings. An index tracking the aviation sector fell 1.27 per cent.

The financial sector fell 1.52 per cent on profit-taking after a strong rally in previous days, and as insurance giant China Life posted disappointing third-quarter results.

China Life Insurance Co Ltd, the country's second-biggest insurer by market value, reported on Thursday a 76 per cent plunge in quarterly net profit due to lower equity income in a volatile domestic stock market.