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Calm returns to China's stock market after $1.3 trillion rout

May 28 2019 09:00
Bloomberg News

Investors are taking a breather from the recent market rout that has wiped out almost $1.3 trillion from China's stock market.

The CSI 300 Index hasn’t moved more than 2% in either direction in the past seven sessions, the longest streak of calm since February. Volatility has dropped too, with a 10-day measure on the gauge -- which comprises some of the largest listings on the Shanghai and Shenzhen stock exchanges -- dropping from a 7-month high this month.

The gauge was 0.5% higher as of 2:30pm.

Stocks had plunged earlier in May as the US raised tariffs on Chinese imports and threatened to blacklist the country’s tech firms including Huawei Technologies and surveillance equipment maker Hangzhou Hikvision Digital Technology.

The muted market follows a recent acceleration foreign selling across the border.

Offshore investors net sold mainland shares via the exchange links for eight sessions through Monday, the longest run of outflows since early 2017, data compiled by Bloomberg show.

They turned net buyers on Tuesday, with inflows set for the biggest in one month.

A momentum indicator on the CSI 300 Index has stabilized in the past few weeks, moving away from a level that signaled it was oversold.

Trading volume has withered on the mainland markets, with turnover shrinking over seven consecutive weeks in the longest stretch on record.

Volume on the index was 28% lower than average level at this time of day in the past 30 days.

Investors may be trying to strike a balance after absorbing the recent shocks from the trade talks between China and the US, according to Gerry Alfonso, director of the international business department at Shenwan Hongyuan Group.

"There are no big surprises recently with investors gradually digesting the new overall macro environment," Alfonso said.

"The most reasonable thing to do is to focus on company fundamentals and find mid-term opportunities without having to commit heavily on the overall direction of the market."

huawei  |  china  |  markets  |  stock
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