CHINA STOCKS REBOUND FLEETING, EXPERTS SAY

The dust may be settling on the recent rout in the world’s second-largest stock market, but any rebound could prove fleeting in the wake of liquidity tightening risks and frayed nerves of battle-weary investors.

While China’s CSI 300 Index capped its first quarterly drop in a year, it has risen 4.8% from a low in March. A Bloomberg survey of 19 fund managers and analysts shows the index will end the June quarter lower.

That’s set the tone for the overall market -- a state of limbo, trapped in a horizontal range as investors ponder the shrinking liquidity impact against the strength of business recovery, John Liu, April Ma, Amy Li, Mengchen Lu and Justin Chin reported for Bloomberg News.

“Relatively tight monetary environment and deceleration in new loans will continue to pressure valuations in the most expensive parts of the market,” said Zhang Haidong, a Shanghai-based fund manager at Jinkuang Investment Management. “This means it's difficult for the index to climb much, though new lows are also unlikely amid an economic recovery.”

China’s CSI 300 was at the center of turbulence the moment it peaked at a 13-year high in early February. It has nose-dived since then, entering a technical correction in a brutal rout triggered also by expensive valuations.

The measure is down 1% so far this year. It has lagged a broader index of emerging-market stocks for five straight months, with the 5.4% loss in March making for the biggest relative underperformance since 2016.

The CSI 300 is expected to reach 4,950 at the end of the second quarter, implying a 4% drop from Friday’s close.

The Shanghai Composite Index is seen to reach 3,400 points or falling about 2% from the close. The ChiNext index, a gauge of small-cap stocks, may slip further by 12% to 2,500 points.

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