SHANGHAI: China’s blue-chip index fell the most in nearly five months on Thursday after media reports of possible regulatory curbs on speculation, and the end of a politically significant military parade in Beijing.
Sentiment also soured on a tumble in tech bellwether Cambricon amid worries about fund outflows in an upcoming index rebalancing.
The CSI300 Index slumped 2.1 percent, the biggest loss since early April. Shanghai stocks, which hit 10-year highs last week, lost 1.3 percent, while Hong Kong’s Hang Seng Index dropped more than 1 percent. China’s financial regulators are considering a number of cooling measures for the stock market, including removing some short-selling curbs, Bloomberg News reported.
The report gave investors a reason to sell after China’s stock market jumped 10 percent in August in heavy trading and record margin financing, raising concerns about overheating.
“From a technical perspective, there is a strong need for profit-taking, and today’s Bloomberg report has accelerated investor exits,” said Zhao Jian, head of Atlantis Finance Research Institute.
“Then from a financial stability perspective, we believe regulators don’t want such a rapid and drastic rise,” which could trigger significant market volatility, he said. The end of China’s biggest military parade on Wednesday also added to profit-taking. Investors had widely expected authorities to ensure market stability ahead of the event.
“Additionally, the A-share market had previously priced in substantial optimism around yesterday’s military parade,” said Kenny Ng, securities strategist at China Everbright Securities International.
“With the event concluded, related thematic stocks are now retreating, contributing further downward pressure.”
Defence stocks, which had been climbing steadily ahead of the parade, fell sharply.
Tech shares, a key pillar of China’s bull run, led the market decline on Thursday with artificial intelligence (AI) chip giant Cambricon slumping 15 percent, its biggest daily loss since January.
A doubling in Cambricon’s share price in August boosted the stock’s weighting on the STAR50 Index to 15 percent. That exceeds the weighting cap of 10 percent, raising concerns of rebalancing by passive funds as the result of a planned weighting adjustment of the index on September 12.