China’s CSI 300 Index Falls 10% From Recent Peak as Rout Goes On

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China’s CSI 300 Index Falls 10% From Recent Peak as Rout Goes On

Catherine Ngai and April Ma
·2 min read

(Bloomberg) -- China’s CSI 300 Index has fallen more than 10% from its Feb. 10 peak, poised to enter a technical correction as traders rush to offload growth stocks in the $11 trillion market.

On Friday, China’s main stock gauge slid as much as 2% in opening trade, extending losses from the peak reached right before the Lunar New Year holiday. It pared the decline to 1.6% as of 9:54 a.m. in Shanghai. The recent rout has been driven by consumer staples, with the subgauge down about 20% in the same time frame.

The rout has come amid growing concern over liquidity tightening and possible asset bubbles, with markets seeking fresh cues from the National People’s Congress that began today. The nation’s top banking regulator jolted markets on Tuesday with a warning about the need to reduce leverage amid the rising risk of bubbles globally and in the local property sector.

“The market’s primary focus is not the long-term policies or fundamentals, liquidity and U.S. yields are what it’s obsessing over right now,” said Liu Xiaodong, a fund manager at Shanghai Power Asset Management Co. “So a 10% drop in the CSI 300 index isn’t excessive.”

The selloff has rapidly deflated a rally that briefly sent the benchmark CSI 300 Index past its 2007 record, with sure-win bets turning sour. China’s biggest stock Kweichow Moutai Co. has lost more than 20% from its peak.

China set a conservative economic growth target of above 6% for the year, well below what economists forecast, and outlined ongoing fiscal support with prudent monetary policy. The government will narrow the budget deficit to 3.2% of gross domestic product this year from 3.6% in 2020, Premier Li Keqiang said Friday at the opening of the NPC.

(Updates prices, adds a quote in the fourth paragraph and GDP growth target in the last.)

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