BEIJING: A bruising three-day selloff left Chinese stocks heading for their biggest weekly loss in five years Friday, after investors took pause after a breathtaking rally in 2015 and the authorities clamped down on risky bets.
The benchmark Shanghai Composite Index recovered by 1.3% to 4166.17 Friday, but is still down more than 6% for the week. That would be the worst weekly performance since May 2010, and first week of losses since early March. The index remains up 29% this year.
The volatility isn’t entirely unexpected, as many say the market is due for a cooling off after doubling over the past 12 months. Analysts say investors are looking to take profits, while concerns are growing over a clampdown on margin trading, where investors borrow from brokers to pump funds into the market. A number of initial public offerings has also soaked up cash from the market.
“Investors aren’t prepared for such a steep loss, but the market is bound to face a correction,” said Qian Qimin, analyst at Shenyin Wanguo Securities. “The accelerated pace of IPOs has drained certain liquidity on the secondary market.”
Among the biggest losers this week were heavyweights in infrastructure, transportation, aviation and steel.
International brokers have also been warning investors of a less cheerful outlook. Morgan Stanley downgraded Chinese stocks for the first time in more than seven years Thursday, while Bocom International declared this week that the market will enter a highly volatile correction phase.
