Chinese shares tumbled on Thursday with the blue-chip index suffering its worst fall in nearly 1-1/2 years as worries about a selloff in the bond market bled into equities. Consumer and healthcare firms led the fall and dragged the CSI300 index down sharply by 2.93 percent, to 4103.73, its biggest fall in percentage terms since June 13, 2016. The broader Shanghai Composite Index lost 2.26 percent to 3352.99 points, its worst day since December.
Treasury bond yields remained at multi-year highs despite above average cash injections by the central bank this as concerns that authorities would tighten lending rules took their toll. "The government is stepping up deleveraging, and that would have an impact on liquidity in the stock market as well," said Yang Hai, strategist at Kaiyuan Securities.
"In micro-lending, for example, some people have borrowed money to bet on stocks. Some investors are now slashing their positions in expectations of a total ban of the business." Policymakers announced draft guidelines restricting asset management products last Friday, and earlier this week Beijing unveiled new rules limiting micro-lending businesses.
Neither measure specifically targets stock market investing, but both are expected to reduce leverage, which could potentially dent stock market liquidity. Sectors dived across the board, led by the defensive consumer and healthcare firms slumping 3.9 percent and 4.1 percent, respectively, as investors pocketed gains after a strong rally this year. Ping An Bank fell 5 percent, leading a retreat in banking sector, while New China Life Insurance slumped 4.1 percent to weigh on financial shares.
The smaller Shenzhen index ended down 2.92 percent and the start-up board ChiNext Composite index was weaker by 3.16 percent. ** Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.11 percent while Japan's Nikkei index closed up 0.48 percent.
The largest percentage gainers in the main Shanghai Composite index were SJEC Corp up 10 percent, followed by Inner Mongolia Eerduosi Resources Co Ltd gaining 8.57 percent and Gome Telecom Equipment Co Ltd up by 7.04 percent. The largest percentage losses in the Shanghai index were Pci-Suntek Technology Co Ltd down 10.02 percent, followed by Tongwei Co Ltd losing 10.02 percent and Shandong Tyan Home Co Ltd down by 10.01 percent. So far this year, the Shanghai stock index is up 10.53 percent, while China's H-share index listed in Hong Kong is up 27.3 percent. Shanghai stocks have risen 1.09 percent this month.