China’s stocks drop on overheating signal, as index approaches bull-market territory after a five-week winning streak
- The CSI 300 Index still advanced for a fifth straight week, the best run in two years, to take the gauge within 1.7 per cent of bull-market territory
- Consumer names slipped while gains in utilities limited losses
The CSI 300 Index retreated 0.4 per cent to 4,466.72 at the close on Friday. The Shanghai Composite Index lost 0.3 per cent, while the Shenzhen Component Index also slipped by that much. Financial markets in Hong Kong are closed for the 25th handover anniversary.
Consumer stocks led the decliners on the broader market, as appliances maker Midea and SAIC Motor dropped at least 2 per cent. Gains in utilities stocks limited the decline, with China Yangtze Power adding more than 5 per cent on a plan to buy two dams from the parent.
The 14-day relative strength index for the CSI 300, a gauge tracking the 300 biggest companies traded in Shanghai and Shenzhen, rose to 73 this week, surpassing the 70-point threshold that typically indicates the market is overheated and due for a breather.
“We’ll need to see further improvement in expectations about the economy and liquidity, given that the rebound has been going on for two months,” analysts at China International Capital Corp said in a note to clients on Friday. “Otherwise, we’ll be in for more volatility.”