A major correction in the MSCI-China stock index is expected to come soon as investors re-calibrate the outlook for the mainland's economic dynamics, Nomura Securities said. Optimism is likely to continue during the National People's Congress and the Chinese People's Political Consultative Conference early this month as investors look for an acceleration in investment after the meetings. However, that could be the end of the rally, Nomura said. "We are more pessimistic than consensus," said Wendy Liu, equity research head at Nomura. "Capital preservation would be very important over the next several months." The MSCI Index had gained almost 30 per cent, from a low on September 5 of 51.59 points to 66.73 points on February 1. However, it has since shed some of those gains, to be up 19 per cent from the September low, at 61.38 points. In Nomura's view the pace of credit expansion on the mainland seems to have peaked. Policy-tightening in the property sector is expected to increase in coming months. In addition, the decreasing number of labourers and the worsening environment are eroding medium to long-term economic prospects. All of these trends are expected to result in a correction in Chinese stocks in the next few months, the bank said. While many economists forecast GDP growth of 8.1 per cent for this year, Nomura's projection is only 7.7 per cent. The working-age population fell by 3.45 million over the past year. This was the first decline since at least 1992 and signalled the end of the "population dividend" which supported the economic miracle in China over the past few decades, Nomura said. Air pollution, resulting in persistent heavy haze recently across China, is expected to force governments to take action against pollution-intensive industries, which would also lead to a slowdown in growth. "We are now 10 months into the credit expansion, with a substantial reliance on wealth management products and trust loans," Liu said. "I think the pace of expansion is set to slow this year, which would reduce stock market liquidity." Property prices, boosted by plentiful liquidity, have been rebounding since late last year. But Beijing is expected to be keen to stop prices from rising too fast, and curbs could be introduced after the People's Congress and People's Political Consultative Conference meetings.