The bull market in China has been under major corrections this week as the authorities put on the brakes to curb margin trading on the stock market, while most investors think that the bull run is far from over.
The benchmark Shanghai Composite Index slumped 1.41 percent to 4169.6 on Thursday morning, extending its losses after it tumbled 4 percent on Tuesday and 1.62 percent on Wednesday.
Industrial construction firms, electric power suppliers, insurance companies and airlines saw the biggest losses during the morning.
Analysts said the securities watchdog China Securities Regulatory Commission has been stressing deleveraging the heated market, as investors are relying heavily on margin lending to buy stocks, which enlarges systematic risks.
China Securities Journal quoted sources from the banking sector on Thursday as saying that the authority has started inspections to check whether there are capital inflows into the stock market from the commercial market through irregular channels.
"We are aware that the supervisors are sensitive about leverage on the stock market. It is not a surprise that there is top-down urge to decrease margin lending, and it is affecting liquidity. However, the majority believes the central government wants the bull market last," said Nick Fu, a strategist with a Shanghai based brokerage.
Analysts said a major correction is providing good opportunities for late comers to get on the train, and more are expecting the central bank to announce another rate cut in the coming weeks which will inject new liquidity into the equity market.
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