Mainland stocks fall to 2-month low
Investor sentiment about prospects for the Chinese economy weighs heavily on bourses
Chinese mainland stocks on Wednesday declined to their lowest level in two months, amid weak investor sentiment about prospects for the Chinese economy.
The benchmark Shanghai Composite Index fell 1.27 percent to close at 2807.51. It tumbled more than 2 percent during intraday trading, but managed to recoup some of the loss as big-cap financial stocks rallied toward the market close.
Technology stocks, power equipment manufacturers, shipbuilding and materials shares led the decline.
ChiNext Index, which tracks the stocks of high-tech startups traded in Shenzhen, tumbled by 2.93 percent to close at 2020.48.
Analysts said that Wednesday’s decline could reflect fragile investor sentiment about prospects for the economy after key data for April released over the weekend showed weaker than expected growth in industrial production, fixed-asset investment and retail sales.
“April data will embolden the China bears to start demanding their pound of flesh again as they argue that the revival in March was too good to be true.
Such is the whipsawing sentiment on China’s outlook,” said Jeremy Steven, Asia Economist at Standard Bank.
The benchmark Shanghai index has declined 21 percent this year, making it the worst performer among the 93 benchmarks tracked by Bloomberg.
Guo Yanhong, a strategist at Founder Securities Co said that Wednesday’s market slump also reflected the rising confusion of investors over Beijing’s policy direction after a recent article by the People’s Daily, citing an unnamed authoritative person, stressed an “L-shape” economic recovery path and criticized using leverage and massive credit easing to stimulate growth.
“Some investors interpreted it as a shift of Beijing’s macroeconomic policy. But some thought it was too drastic and are still digesting the article,” Guo said.
The stock selloff on Wednesday also came after media reports suggested that the securities regulator is mulling new rules to curb the trading leverage of the hedge funds, subsidiaries of mutual funds and asset management firms.