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With hopes for economic recovery fading, China stocks plunge again

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China stocks fell sharply again on Monday, touching eight-month lows, as investors saw hopes for a strong economic recovery fade and worried about fresh regulatory curbs on speculation.

Following the market’s nearly 3 per cent slump on Friday, China’s blue-chip CSI300 index .CSI300 fell 2.1 per cent, to 3,065.62, while the Shanghai Composite Index .SSEC lost 2.8 per cent, to 2,832.11 points.

China April trade data, released on Sunday, doused investor hopes of a sustainable economic recovery, with both exports and imports falling more than expected.

Recovery hopes were further dimmed by an article on Monday in the People’s Daily, the Communist Party’s mouthpiece. It cited an “authoritative source” saying China’s economic trend will be “L-shaped”, rather than “U-shaped”, and definitely not “V-shaped”, but the government will not use excessive investment or rapid credit expansion to stimulate growth.

Shares fell across the board, but selling concentrated in relatively expensive small caps .CHINEXTC amid fears of fresh regulatory crackdown on speculation.

China’s securities regulator said on Friday that the valuation gap between the domestic and overseas market and speculation on “shell” companies – firms used for backdoor listings – merited attention.

An index tracking raw material shares .CSI300MT tumbled nearly 5 per cent as China’s commodity prices continued to fall amid a government crackdown on speculative trading.

Paul

The author Paul