SCI caps steepest monthly drop in 2017 as regulators beef up surveillance and economy stutters
Benchmark stock gauge fell 2.1 per cent in April and investors say weakness in equities expected to continue
China’s benchmark stock index in April posted its worst monthly performance for this year as strengthened regulatory supervision dampened investor appetite for trading in equities.
The Shanghai Composite Index fell 2.1 per cent last month and has breached the 200-day moving average for the first time since September.
As the China Securities Regulatory Commission increased its oversight of the market to guard against stock manipulation, the banking watchdog also issued at least seven documents aimed at reducing commercial lenders’ leverage.
Bocom International Holdings, the securities and asset management flagship of Bank of Communications in Hong Kong, and Hengsheng Asset Management, another leading player, both agree it will take a while for equities to recover because of sapping demand for risky assets and concerns over the strength of the Chinese economy.
“This is just the start for regulatory reforms and near-term uncertainties will increase as the rules are being rewritten,” said Hong Hao, managing director at Bocom International, who is credited as accurately calling China’s boom-and-bust equity cycle of 2015.
“The economy will lose some momentum in the second quarter relative to consensus expectations. The market will languish for a little longer yet.”