The Market Rebounded... But China's Stock Market Plummeted, Shanghai Down 4.5%

Highlighting US-China Conflict
Analysis of Effects Such as Debt Investment Restrictions and Continued Weak Consumption

[Image source=Yonhap News]

[Asia Economy Reporter Ki Ha-young] China was the first major country in the world to achieve an economic rebound after the novel coronavirus infection (COVID-19), but the Chinese stock market plummeted.

On the 16th, the Shanghai Composite Index, the benchmark of the Chinese stock market, closed at 3,210.10, down 4.50% from the previous session. The Shanghai Composite Index, which surged earlier this month, recorded a decline for three consecutive days including this day. Until recently, there was an expectation of breaking through the 3,500 level, but it appears to have entered a correction phase.

The Shenzhen Component Index, which has a high proportion of technology stocks, fell even more sharply, closing at 12,996.34, down 5.37%. The CSI300 Index, which reflects the stock price trends of 300 blue-chip stocks from both the Shanghai and Shenzhen markets, also plunged 4.81%. Nearly 200 stocks in the two major markets hit their price limit down.

Earlier, positive news was announced that China's second-quarter economic growth rate was recorded at 3.2%, significantly exceeding market expectations, but stock prices moved in the opposite direction.

In the market, there is an analysis that the recent intensification of US-China conflicts led Chinese authorities to block credit investments due to concerns about overheating in the stock market, which dampened investor sentiment. Additionally, the consumption indicator, considered the most important in the ongoing economic recovery process, came out weaker than market expectations, which is also interpreted as having an impact.

Some have raised concerns that the abundant liquidity conditions, which were an important cause of the recent bull market, may be weakening. This is because the higher-than-expected second-quarter economic growth rate is expected to reduce the intensity of monetary easing by Chinese authorities in the future.

Daniel So, a securities strategist at CMB International, told Bloomberg News, "Retail sales, which were worse than expected, hurt some consumer stock investment sentiment," adding, "A stable economy means that monetary easing policies may be weaker than expected."