Consumers shares offset losses in small caps as market recovers

Chinese mainland stocks steadied on Tuesday following a sharp sell- off the previous session.

Persistent weakness in small caps offset gains in defensive stocks, showing investors were growing cautious about tougher regulation.

The blue- chip CSI 300 Index rose 0.28 percent to 3,440.97 points.

The benchmark Shanghai Composite Index gained 0.16 percent to 3,134.57 points, while the Shenzhen Component Index climbed 0.73 percent to 10,165.21 points.

Yang Hai, strategist at Kaiyuan Securities, described the rebound, which came after the market’s more than 1 percent drop on Monday – the biggest percentage loss for the year – as “technical” in nature.

“The market bounced after being oversold,” Yang said, attributing the recent weakness to regulatory tightening. “The regulatory crackdown on shadow banking is targeting mainly the banking system, not the stock market, but equities have been implicated.”

Analysts also cited the se- curities regulator’s crackdown, which has driven money into cash- rich blue chips.

The new draft of China’s securities law would improve stock market supervision with stricter measures, better information disclosure and strengthened investor protection, the Xinhua News Agency reported on Monday.

Stocks expected to benefit from the Xiongan new economic zone, in North China’s Hebei Province, rose sharply but gave back much of their gains in the afternoon, as investors again showed wariness over the stricter regulatory environment.

Sector performance was mixed, with consumer stocks outperforming the broader market with a 3 percent rise, as investors sought defensive plays amid bearish trends elsewhere in the market.

Hangzhou Hikvision Digital Technology rose 4.2 percent to a record high as investors chased industry- leading companies with steady growth.