China stocks tum­ble more than 6pc, post big­gest 1-day loss in a month

The Pak Banker - - MARKETS/SPORTS -

China stocks tum­bled more than 6 per­cent on Thurs­day, their big­gest one-day loss in a month, as in­vestors booked prof­its af­ter the mar­ket's re­cent re­bound and awaited pol­icy cues from global lead­ers gath­er­ing in Shang­hai for a G20 meet­ing.

Traders and an­a­lysts cited a con­flu­ence of rea­sons for the slide in ad­di­tion to profit-tak­ing. Th­ese in­clude fears of tighter liq­uid­ity in the fi­nan­cial sys­tem, wor­ries about the cool­ing econ­omy and anx­i­ety over loom­ing lib­er­al­iza­tion of ini­tial pub­lic of­fer­ings (IPOs), which some in­vestors fear could re­sult in a cash crunch.

The bench­mark Shang­hai Com­pos­ite In­dex .SSEC dropped 6.4 per­cent to 2,741.25, its big­gest one-day loss since Jan 26. The blue-chip CSI300 in­dex . CSI300 slumped 6.1 per­cent to 2,918.75 points.

The bear­ish sen­ti­ment spilt over into Hong Kong, where the bench­mark Hang Seng in­dex .HSI dropped 1.6 per­cent and the Hong Kong China En­ter­prises In­dex .HSCE was off 2.4 per­cent.

China's stock mar­kets have lost nearly half of their value since early June last year and have strug­gled to re­cover de­spite a mas­sive and un­prece­dented res­cue ef­fort by the govern­ment and reg­u­la­tors. The plunge, along with China's sur­prise de­val­u­a­tion of the yuan cur­rency in Au­gust, roiled global fi­nan­cial mar­kets and added to fears of a hard land­ing for the world's se­cond-largest econ­omy.

But more re­cently, main­land stocks have re­bounded roughly 10 per­cent from 14-month lows hit in late Jan­uary, fu­eled by a global mar­ket re­cov­ery, cen­tral bank ef­forts to sta­bi­lize the yuan and hopes that Bei­jing will un­veil more stim­u­lus.

The re­bound fol­lows a typ­i­cally bullish pat­tern ahead of an an­nual meet­ing of China's top leg­is­la­ture, which starts on March 5, but traders say the the­matic re­bound could come to an end.

"Mar­ket con­fi­dence is still frag­ile and eco­nomic prospects re­main gloomy, so in­vestors could be tak­ing profit ear­lier than in pre­vi­ous years," said Wu Kan, head of eq­ui­ties trad­ing at Shang­hai-based in­vest­ment firm Shan­shan Fi­nance.

"Many in­stru­ments used to pump money into the sys­tem ma­ture, and there's no sign the cen­tral bank will cut banks' re­serve ra­tios any time soon.

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