China Large-Cap CSI 300 loss -3.50%. What's happening in China?

What is happening in Beijing?
That is what investors are asking in China after the shares in the country fell by a total of 3.53% in two consecutive sessions. The biggest surprise for investors was that the losses accelerated and the CSI 300 saw a 52-point drop in the last 45 minutes, and this was the strongest afternoon drop since the collapse of Chinese stocks in 2016 when Hang Seng dropped by 30%.

But why does the state not interfere, as it usually does?
According to Sun Jianbo, president of China Vision Capital, the ratings of large capitalization companies are too high for state funds to intervene. "We do not need to support the market, because a large number of high-capitalization companies are still very expensive and if we start buying now we are going to put a lot of damage on state funds," Jianbo added.

The main reason for the decline is the high level of margin debt on local exchanges, which exceeded $ 152 billion. for the first time in two years, and this poses a serious risk to the markets. It is for this reason that the reduction of leverage in the financial system is one of the government's highest priorities.

At this point everything indicates that January 2016. can be repeated, and whether this will happen fact the market will show. We remain ready, and if we are deepening the problem, it's a good idea to focus on hedging instruments or to collect some of the gains accumulated during the upward trend.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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