China’s CSI 300 Index drops as traders await more clarity

After the recent highs, the Chinese stock market dropped significantly on Monday. Among many reasons behind this might be the concerns around equities in Shanghai and Shenzhen, which are thought to be overvalued and vulnerable to increasing US bond yields.

On Monday, the market movements showed that China’s CS300 Index of Shanghai and Shenzhen-listed companies dropped as much as 3.5 percent. The Chinese market showed the biggest single-day fall in about seven months, exceeding the 10 percent fall from recent highs.

This is putting the market in a correction, some experts are claiming. Market analysts are saying that traders are focusing on how the increased US Treasury yields might affect the stock market in China. Although the stocks dropped on Monday, the recent data of the country shows increased exports of as much as 60 percent and imports as much as 22 percent compared to 2020 January-February data. The national currency of China was also weaker on Monday.

Over the past few weeks, the Chinese stock market was trending lower, especially compared to the successful 2020 performance. Traders are advised to closely follow trading indicators to make sure they are doing everything right.

Changes in the Chinese market

The changes in the Chinese stock market are especially visible after the successful few months. The financial regulators of the country have recently talked about the risks of asset bubbles that are thought to be forming in domestic real-estate prices. The leaders of the country also noted that they could renew the focus on curbing debt levels in the country. China was one of the only countries to report growth in 2020.

Chinese stocks are down 14% from their peak mid February!#China pic.twitter.com/HcpJDIQG1d

— jeroen blokland (@jsblokland) March 8, 2021

The leadership of the country said that they are aiming to have as much as 6% growth of the gross domestic product this year. This aim is a scale back from previously thought 8% increase. On the other hand, among the companies that experienced a decline on Monday were some of the most valuable stocks in the country. Kweichow Moutai Co was down about 1.17%, which is a state-owned company. The company has lost nearly a quarter of its value since February 10.

Experts are saying that one of the biggest drivers of decreasing stock prices in the country is the lack of good news coming out from the legislative meetings. They are also saying that some traders are holding more cash at the time, awaiting further steps from China’s central bank and more clarity over the economic growth outlook. Some analysts are also saying that they are expecting the longer-term upward trajectory of the CSI 300 Index to remain intact.