Chinese blue-chips dip on high valuations, policy tightening fears

SHANGHAI: Chinese blue-chips slipped on Monday, after touching record highs last week, hit by investor concerns over high valuations of these stocks and possible policy tightening.

China's blue-chip CSI300 index fell 1.47% to 5,693.85 by the end of the morning session. The Shanghai Composite index was down 0.06% at 3,693.88.

Liquor shares swooned, with Kweichow Moutai Co Ltd dropping 4.63%, as selling by foreign investors through the Stock Connect channel weighed.

The consumer staples sector slumped 4.18% and the healthcare sub-index dropped 3.28%.

Despite the falls, valuations are still near record highs and some analysts expect earnings to remain strong on a cyclical recovery.

"In particular, we could see a sharper rotation into cyclical stocks like banks, materials and energy, with tech shares remaining strong following very robust performance (year-to-date)," Carlos Casanova, senior economist for Asia at Union Bancaire Privee, said in a note.

But while China left its benchmark lending rate for corporate and household loans unchanged for the 10th straight month on Saturday, matching market expectations, recent weeks have seen mounting speculation that authorities may begin to adopt a tighter policy stance.

Expectations for a global recovery helped to lift the Hang Seng Index up 0.46% in Hong Kong, while Chinese H-shares listed in Hong Kong fell 0.02%.

Shares of some firms set to be included on FTSE Russell's global benchmarks surged after the index provider announced their inclusion late last week.

Shanghai Haohai Biological Technology Co Ltd surged 14.54%, and China Railway Signal & Communication Corp Ltd jumped 3.85%.

The STAR50 index, the benchmark tracking the STAR Market, fell 0.72%, while Shenzhen's tech-heavy ChiNext lost 2.53%.

The smaller Shenzhen index dipped 0.48%.

The yuan was quoted at 6.4621 per US dollar, 0.04% weaker than the previous close of 6.4598.