What’s behind the Chinese equities melt-down? – TDS

By FXStreet FXStreet (Bali) – Sacha Tihanyi, Senior EM Strategist at TDS, notes that the likely main culprit for the selloff in Chinese stocks was jitters ahead of the January 8th lapse on the ban in short-selling.

Key Quotes

“The official start of the year has been unkind to Chinese risk assets as equity markets melted down by 7% to trigger the ‘circuit breaker’ trading halt on January 4th. The likely main culprit for the selloff is jitters ahead of the January 8th lapse on the ban in short-selling that was put in place during the equity meltdown of this summer.”

“Though there were also weak PMI prints released in recent days (official on the 31st and private sector on the 3rd) that likely didn’t help matters, they were not the key equity market drivers. Nevertheless, the PMI reads do not bode overly well for a significant shift in the growth dynamic in China, a fact corroborated by our additional statistical analysis.”

“The upcoming lapse in the short-sale ban has contributed to market jitters, and while we’d expect further negative volatility for Chinese equities this week, we don’t expect to see a repeat of the summer in terms of depth or duration of selloff. …read more

Source:: FX Street