Chinese shares fell more than 1 per cent on Monday as trading resumed after the Lunar New Year break and investors caught up with wild swings in global markets, while Beijing took another swipe at currency devaluation talk with a strong fix for the yuan.

The Shanghai Composite Index was down 1.6 per cent after its first morning’s trade since February 5, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen was down 1.4 per cent.

The moves were relatively modest, given Japan’s Nikkei alone sank 11 per cent last week, though the Chinese indexes have had a more brutal 2016, losing about 22 per cent and 12 trillion yuan ($1.84 trillion) in market value so far.

“Today’s investor sentiment in China is damped by last week’s global equity sell-off," said Zeng Yan, strategist at Zhongtai Securities Co.

Zeng said the impact could be temporary, however, as last week’s global sell-off was mainly driven by falling commodity prices and concerns about the impact on European banks.

Brokerage Industrial Securities said in a report that Chinese shares could even post a modest rebound in February as fears of currency depreciation dissipated, which would in turn ease pressure on capital outflows and give the People's Bank of China (PBOC) more room for monetary stimulus.

The PBOC fixed the yuan at its highest rate in over a month as it continued efforts to stem devaluation speculation.

Reflecting the recent retreat in the US currency, the Monday fix of 6.5118 yuan per dollar, a reference point for trading, was much stronger than the 6.5314 set before the holiday, and the spot rate firmed to 6.5143.

The news provided a fillip to risk appetite across Asia and nudged the safe-haven Japanese yen lower.

Weak trade data

In an interview over the weekend, PBOC Governor Zhou Xiaochuan said speculators should not be allowed to dominate market sentiment regarding China’s foreign exchange reserves and it was quite normal for reserves to fall as well as rise.

Zhou said there was no basis for the yuan to keep falling, and China would keep it stable versus a basket of currencies while allowing greater volatility against the US dollar.

China reported its weakest economic growth in 25 years for 2015, and on Monday it released figures showing imports and exports both fell more sharply than expected in January compared with a year earlier.

Chinese markets appeared to shrug off the disappointing trade numbers, though they will add to worries about a global economic slowdown.

Figures out over the weekend suggested there was still life in the Chinese consumer, however, with retail sales growing 11.2 per cent during the week-long Lunar New Year vacation compared with the same period last year.

The holiday is especially important for retailers, which vie for customers by launching promotions and discounts. Millions of people take time off work to travel and generally spend more than usual during the break. ($1 = 6.5146 Chinese yuan renminbi)

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