What's going on with China's stock market? | Financial Post
China’s stocks look to be falling back down to reality.
After an epic rally that saw the Shanghai Composite index climb more than 40% this year and the tech-heavy Shenzhen Composite rise a world-leading 90%, a correction — or maybe worse — looks to be in the works.
Last week both indices lost more than 10%, falling solidly into correction territory. But investors hoping that some of the volatility would ease this week will likely have to do more waiting.
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Tuesday was one of the most volatile trading days for the Shanghai Composite since the financial crisis, with the index falling nearly 5% before making a big 312-point comeback to end the day up 2.2%.
The correction comes at a time when foreign investors have been increasingly moving in to get a piece of the rally. China’s mainland stocks, known as A-shares, were off limits to foreign investors until recent government changes allowed limited buying.
Both FTSE Group and Vanguard Group Inc, providers of indices and exchange-traded funds, announced a month ago that they were adding A-shares to their products so customers could buy into China. Index provider MSCI Inc., creator of the much tracked MSCI Emerging Markets index, delayed a decision to include a-shares in its products earlier this month.
How much further China’s shares have to correct remains unclear. Analysts are speculating that with the massive run-up earlier this year, at the very least, the rally could be over for the time being.
“The A-share market correction is likely to continue in the short term as the leverage or liquidity-driven beta rally could be over,” said Stephen Sun, analyst with HSBC.
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What's going on with China's stock market? | Financial Post
