China Shares Fall on Thursday Close

China shares fell on Thursday as the blue-chip index went through its worst fall in almost a year and a half. This happened the same time that worries about a selloff in the bond market drained into equities.

The drop was led by the consumer and healthcare firms, yanking down the CSI300 index by 2.93 percent to 4103.73. This has been the biggest fall in percentage since June 2016.

The larger Shanghai Composite Index fell by 2.26 percent to 3352.99 points, worst day since December last year.

Despite above average cash injections made by the central bank, Treasury bond yields continued to stay at multi-year highs. This happened as concerns regarding authorities possibly tightening lending rules took their toll.

“The government is stepping up deleveraging, and that would have an impact on liquidity in the stock market as well,” said strategist, Yang Hai. “In micro-lending, for example, some people have borrowed money to bet on stocks. Some investors are now slashing their positions in expectations of a total ban of the business.”

Policymakers made announcements last Friday of draft guidelines which will restrict asset management products. Earlier this week, Beijing revealed new rules that would limit micro-lending businesses.

Neither measure might specifically target stock market investing, but they are expected to reduce leverage. The leverage reduction has a huge possibility of denting stock market liquidity.

Along with the investors pocketing gains after a strong rally this year, sectors dived across the board. The slump was led by consumer sector, which fell by 3.9 percent, and the healthcare firms, dropping 4.1 percent.

Ping An Bank slid 5 percent, which led a retreat in the bank sector. New China Life weighed down on financial shares as it fell 4.1 percent.

Shenzhen index, a smaller index, fell 2.92 percent while the start-up board ChiNext Composite index grew weak by 3.169 percent.

Regionally, the MSCI’s Asia ex-Japan stock index dropped 0.11 percent as the Japan Nikkei index rose by 0.48 percent.

The Yuan was recorded at 6.5967 per U.S. dollar by 0708 GMT, which was 0.26 stronger compared to its previous close of 6.6142.

The largest gains in percentage in the main Shanghai Composite Index were the SJEC Corp. surging 10 percent, with the Inner Mongolia Eerduosi Resources Co. Ltd, rising 8.57 percent, and the Gome Telecom Equipment Co. Ltd gaining 7.04 percent.

In comparison, the largest percentage losses were the Pci-Suntek Technology Co. Ltd and Tongwei Co. Ltd, both down by 10.02 percent, and the Shandong Tyan Home Co. Ltd falling by 10.01 percent.

Shanghai stocks rose by 1.09 percent this month.

In the duration of 2017, the Shanghai stock index has risen by 10.53 percent, while the China H-share index registered in Hong Kong is up by 27.3 percent. 

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