After a week of relatively stable trade during China`s 19th Communist Party Congress, Chinese stocks took a tumble in early Monday trade.
The Shanghai Composite was down 0.73 percent at 12:47 p. HK/SIN after sliding 1.3 percent earlier in the session. The Shenzhen Composite and the ChiNext index, Shenzhen`s Nasdaq-style start-up board, were down 1.826 percent, respectively, after tumbling about 2 percent earlier in the day.
Experts gave different explanations for the fall in stock markets, with one pointing to the retreat in government bonds as a key factor.
"The bond market is crashing today," said Hao Hong, head of research at Bocom International, adding that there were concerns about liquidity in the market.
Yields on China`s 10-year government bond had risen last week due to expectations that the country`s central bank would continue its deleveraging campaign. The 10-year`s yield stood at 3.89 percent at 11:34 a. HK/SIN — around the highest level in three years.
"China`s bond market entered a bear market despite China`s strong issuance of dollar sovereign bonds last week, as well as [the] People`s Bank of China`s gesture to ease liquidity concern," Tommy Xie, an economist at OCBC Bank, said in a morning note.
The Chinese government had issued its first dollar-denominated bonds in more than a decade last week. Orders exceeding 11 times the deal-size had been placed, local news agency Xinhua reported.
Another market watcher said the downtrend in Chinese stocks could have come as a psychological pullback after the Shanghai Composite breached the 3,400 level last week.
Kenny Wen, a strategist at Sun Hung Kai Financial, said it was likely that retail investors were looking to lock in profits during the session. The slump in shares across sectors suggested a broad-based correction of sorts, Wen added.
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