Chinese equity markets are seen staying choppy as some investors are on the prowl for bargains while others take profits off the table in an uncertain atmosphere where margin loans and an uncertain economy act as a major overhang over stocks.
The Shanghai Composite fell 53.09 points or 1.29 per cent to finish Friday at 4,070.83, and ended the week 2.87 per cent higher. Hong Kong’s Hang Seng Index though gave up 1.06 per cent to settle at 25,128.51 on Friday, losing 1.1 per cent on a weekly basis.
“We saw a lot of rapid account openings and rapid take up of margin loans. Those two things simply put them in a position where an exponential rise can’t continue. In this case, I think the authorities mistakenly encouraged things upwards,” said Kevin Gardiner, Global Investment Strategist at Rothschild Wealth Management.
“The lack of liquidity is on the downside and I think they do have to address that at some stage…I expect Beijing to move away the funds gradually in the second half,” said Gardiner.
Outflows from Chinese equities continued for the second week ending on July 23, as global mutual fund and exchange traded funds pulled a total of US$2.9 billion from the sector, according to a Jefferies weekly global asset fund flow tracker.
