Blue-chips lead China stocks lower as rally unwinds

SHANGHAI, July 4 (Reuters) – China stocks fell on Tuesday,
led down by the blue-chip index that some analysts say has been
due for a correction after rallying strongly on inclusion of
Chinese shares in a key MSCI index.

The blue-chip CSI300 index fell for the third
session, dropping 0.8 percent to 3,619.98 points.

The Shanghai Composite Index lost 0.4 percent to
3,182.80 points.

“The recent correction is technical as blue-chips had far
outperformed the broader market this year, but we see little
chances for a major downturn in industry-leading big-caps as
they are not overvalued,” said Xu Wei, an analyst with Hongxin

The robust trend in China’s “nifty 50”, the 50 most
representative blue-chips in Shanghai, is broadening to the
so-called “MSCI222”, and investors could explore opportunities
in blue-chips with solid fundamentals as rotation into them is
clear, Xu added.

U.S. index provider MSCI last month decided to add 222
China-listed stocks to its Emerging Markets Index, tracked by
around $1.6 trillion.

The inclusion is widely expected to benefit long-term
development of China’s stock market.

Worries over tight liquidity conditions have eased after the
mid-year macro-prudential assessment (MPA), although sellers
have been pressuring Chinese markets over the past week or so on
lingering fears of a cash crunch and slowing economic growth.

On Tuesday, sectors contracted across the board, led by
consumer and real estate stocks.
(Reporting by Luoyan Liu and John Ruwitch; Editing by Richard

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