Mainland Chinese stocks tumbled Monday morning, with the benchmark Shanghai Composite Index heading for the biggest decline in seven months, on renewed concerns that the nation’s top policy makers will tighten the scrutiny of the financial industry.
The Shanghai Composite Index slid as much as 2.2 per cent, or 70.36 points, to 3,153.58 in early trading, poised for the biggest decline since December 12.
Trading volumes on the gauge were more than three times the five-day average.
The large-cap CSI 300 Index dropped 1.4 per cent. The ChiNext gauge of smaller firms lost 3.7 per cent.
Concerns are re-emerging that the Chinese regulators will restart a tightening of liquidity and crack down on equity speculations after the nation’s top policy makers decided to set up a super regulatorto coordinate between the regulators of banking, securities and insurance.
“The conference has set the tone that financial deleveraging and strengthened market supervision will exist for a quite long period of time in the future,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai.
“There’s also a concern that the bubble of small-cap stocks has yet to burst and high earnings risks could emerge from it.”
The People’s Bank of China will also be imbued with powers to assume a bigger role in preventing financial risks, as President Xi Jinping emphasised the importance of financial security at the National Financial Working Conference over the weekend, the Xinhua News Agency reported.
Smaller firms led declines, after Guangdong Wens Foodstuff Group, the biggest company on the ChiNext gauge, forecast a decrease in first-half earnings. Leshi Internet Information & Technology also said it probably had posted a loss in the first half.
China’s economy grew 6.9 per cent in the second quarter, matching the growth rate a quarter earlier, the statistics bureau said earlier in the day.
In Hong Kong, however, stocks advanced to extend a weekly gain in the morning trade.
The Hang Seng Index rose 0.3 per cent, or 90.81 points, to 26,480.04. The gauge climbed 4.1 per cent last week, capping its best weekly performance since July 2016.
The Hang Seng China Enterprises Index, also known as the H-share index of Chinese companies listed in the city, added 0.6 per cent, or 59.64 points, to 10,787.71.
The gains followed positive cues from US stocks, as markets expected weaker US economic data would reduce the odds for the Federal Reserve to raise interest rates. .
In Friday’s US trading, all three major indices closed up. The Dow Jones Industrial Average finished 0.4 per cent higher and the S&P 500 Index gained 0.5 per cent, both closing at records. The Nasdaq Composite rose 0.6 per cent.