China market rally falters alongside key Asian markets after kicking off trading in the Year of the Ox with a bang

Chinese markets, which kicked off the Year of the Ox on a strong note, took a breather along with key Asian markets in Hong Kong, Japan and South Korea, as concerns about the impact of rising Treasury yields, overvalued tech stocks and inflation weighed on investor sentiment.

The CSI 300, which tracks the 300 biggest stocks on the Shanghai and Shenzhen stock exchanges, slipped 0.7 per cent to 5,768.38, after opening 2 per cent higher at a record 5,922.07. The Shenzhen Component retreated 1.2 per cent to 15,767.44, after rising as much as 2.1 per cent. The Shanghai Composite bucked the trend, adding 0.6 per cent to 3,675.36 after paring gains of as much as 2.1 per cent.

The yield on benchmark 10-year US Treasury notes briefly rose above 1.33 per cent on Thursday before retreating below the 1.3 per cent level. A day earlier it went past 1.3 per cent for the first time since February 2020 when the pandemic broke out.

Although the mainland markets were dragged lower by concerns over rising inflation and US Treasury yields, it does not mean that the bull run is coming to an end, said Stanley Chan, director of research at Emperor Securities.

“A controlled correction is healthy for a sustained bull market,” said Chan. “The current outlook for the economy is improving, and the pandemic is slowly coming under control.”