China’s US$3 trillion stock surge triggers wild volatility reminiscent of 2015 crash
Profit-taking and retail investor frenzy are driving the swings in China’s onshore markets, raising concerns about a potential market correction
The US$3 trillion bull run in Chinese stocks has an unintended consequence: rising volatility that has the potential to match the wild ride seen in the boom-to-bust cycle nearly a decade ago.
The 10-day realised price swings of the benchmark CSI 300 Index have reached a level not seen since August 2015, according to Bloomberg data. The volatility was amplified as day traders resorted to profit-taking, taking advantage of the steep rise in stock prices. Investors’ mood also turned cautious before a crucial finance ministry briefing on Saturday amid fears the fiscal stimulus announced at the meeting will fall short of expectations.
The CSI 300 has dropped almost 9 per cent since Tuesday, surrendering part of the 35 per cent gain over the past three weeks that added US$3 trillion in market value to China’s onshore stocks.
The swings in smaller companies, an area of retail interest, are even more stunning. The ChiNext index of start-ups trading in Shenzhen surged 67 per cent in the seven trading days up to Tuesday, before erasing nearly half of the gains over the past three days.
“Some short-term investors who joined the rally earlier may choose to book profits, increasing market volatility,” said Meng Lei, a strategist at UBS Group in Shanghai.
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Wild swings in Hong Kong and mainland China stock markets
