Chinese stocks, which rose fast and furious to valuations that haven’t been as high since 2011, have hit a slump, according to Bloomberg.
Hong Kong’s Hang Seng China Enterprises fell 2.2% for its biggest loss in since January. Prior to the correction, the relative strength index, which signals how robust trading is, was above 70, a sign that it could not maintain the gains and was ready to take a few steps back. Chinese Merchants Bank, New China Life Insurance and Tencent took a dive. Hainain Airlines rose 10% on the news that management is raising funds by selling some shares.
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According to Bloomberg, the H-share rally, “absolutely caught people by surprise, ” with a 22% rise so far this year. U.S. investors were able to benefit somewhat with assets a US based China fund rising to $7 billion, but prior to this, there were significant withdrawals from the fund. Michael Shaoul, head of Marketfield Asset Management, told Bloomberg, “A closing of the gap seemed increasingly likely to take place. But most people thought it would come about via a collapse of the A-share market.”