Asian markets finished Monday’s trading session awash in red ink, with Hong Kong’s Hang Seng index down 1.9% and Tokyo’s Nikkei losing 0.42%.
But it was China that was hit hardest of all.
The CSI300 index, which covers Shanghai and Shenzhen, dropped 3.47%, the biggest one-day fall in about seven months to take the pullback from the most recent peak to 12%.
Monday’s close of 5,080 points means the CSI300 is also now under the level at the start of 2021 of 5,266.
For an economy leading the world so far as growth is measured and exports and imports, the weakness in the stockmarket this year is not a good look.
Reuters and the Financial Times say local analysts believe the fall is linked to fears about a possible rise in inflation in the US and rises in US bond yields.
But the real driver is said to be the occasional warnings from senior Chinese regulators and political officials about the dangers of debt and ‘bubbles’ in offshore markets (ie on Wall Street).
Ma Jun, an adviser to the People’s Bank of China, was quoted as saying in January that central bank policies need to be adjusted to address the risk of the bubble. That’s when share price started wobbling
Then last week, there was a comment from Guo Shuqing, the top domestic banking regulator who revealed he was concerned about the ‘bubble’ in overseas markets and its potential impact on China’s financial system and its real estate sector.
Monday’s falls came a day after news that Chinese exports increased by more than 60% and imports rose 22% in January and February, reflecting both the domestic recovery from the pandemic and the surge in global demand.
At the same time the People’s Congress (the rubber stamp Parliament for China) is holding its one and only session for this year and there are fears that the contrast between the strong political message about a Chinese economy leading the world, will be damaged by a tanking stockmarket.
The start of month surveys of Chinese manufacturing and service sectors showed a small easing, but both are still expanding.
Inflation data for China for February is out tomorrow and is expected to show continuing deflation at the consumer level and a small rise in producer prices.
