What’s next for China’s bonds and equities, now that Xi Jinping’s party is over?

The party’s over, let the games begin.

China watchers had long suspected that Beijing would be more tolerant of bigger market moves after the Communist Party’s once-in-five-years congress ended last week - but the ferocity of the sell-off in bonds and stocks took analysts by surprise.

Ten-year sovereign yields surged 20 basis points in four days to a three-year high before central bank liquidity injections halted the slide, while shares in Shanghai are hurtling toward their biggest weekly drop in almost three months. Reasons for the stumble have varied, with - as is typical in China’s markets - speculation feeding off speculation to further fuel losses.

These are the main factors cited as being behind the slump:

The Economy: People’s Bank of China Governor Zhou Xiaochuan said just before the start of the 19th Party Congress on October 18 that growth may quicken to 7 per cent in the second half.

That went against the consensus for China to see a strong first half followed by moderate cooling. These comments helped trigger the surge in benchmark bond yields.

Deleveraging: Beijing’s bid to rein in the country’s debt pile has hung over markets all year. Concern built during the congress that President Xi Jinping - more powerful than ever after the twice-a-decade meeting - will champion a ramping up of the deleveraging drive now that the event has passed. PBOC chief Zhou stoked this angst by reiterating his concerns about corporate debt risk during the congress. The China Factor: Individuals account for the majority of trading in China’s mainland equity market, which means slight changes in sentiment can lead to extreme moves as players follow the herd. Speculation officials would ensure stability during the congress - as is typical around key political events - merged into concern they would pull the rug once the meeting was over, compounding the recent sell-off.