China stocks dipped on Wednesday following the previous day's sharp rally, as growing optimism about MSCI adding mainland stocks to its emerging markets index was offset by worries over China's economy and a looming US rate hike. The bluechip CSI300 index fell 0.3 percent, to 3,160.55, while the Shanghai Composite Index dipped 0.1 percent, to 2,913.51 points.
There was little market reaction to the official and private surveys on China's manufacturing activity, which were roughly in line with expectations, underlining doubts that the world's second-largest economy is picking up. Some investors took profit from Tuesday's more than 3 percent surge in China's shares, which was underpinned by expectations that US market index provider MSCI could add mainland stocks to its emerging market benchmark for the first time.
David Dai, Shanghai-based investor director at Nanhai Fund Management Co, said any market rally was unlikely to be sustained. "The economy is still weak, and the Fed will likely raise rates soon. I don't think the market will go up much further. The best strategy now is to take profit." Financial firms dropped following Tuesday's jump, offsetting gains in the material and energy sectors.
Li Wei, economist at Commonwealth Bank of Australia, said China's economy should be largely stable in the near term due to a supportive policy stance. "However, gravity should reassert in Q4," he added. Some investors took profit from Tuesday's more than 3 percent surge in China's shares, which was underpinned by expectations that US market index provider MSCI could add mainland stocks to its emerging market benchmark for the first time.
Such a prospect has lured investors into the Chinese market recently. CSOP FTSE China A50 ETF - the biggest overseas-listed ETF that allows direct foreign investment in mainland China stocks - said it had attracted net inflows worth 4.4 billion yuan ($667.37 million) over the past week, boosting the fund size by a fifth.
However, David Dai, Shanghai-based investor director at Nanhai Fund Management Co, said any market rally was unlikely to be sustainable at this stage. China's index futures market was calm on Tuesday, after the China Financial Futures Exchange said that sell orders from a hedging client triggered a broader technical sell-off that caused Tuesday's one-minute flash crash.