Chinese shares copped a rare hammering today

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In a rarity of late, Chinese stocks were thumped on Wednesday, cascading lower throughout the session before staging a modest bounce into the close.

The benchmark Shanghai Composite index finished the day down 2.3% at 2972.6, recovering from a fall of more than 4% earlier in the session.

All sectors finished deep in the red with healthcare, technology, telecoms, industrials, consumer staples, materials and consumer discretionary all falling by more than 3%.

Financials, the largest component of the index by capitalisation, helped to minimise the damage, slipping by 0.8%.

In other mainland Chinese markets, large cap indices outperformed their smaller peers.

The SSE 50 index — comprising the 50 largest stocks listed in Shanghai by value — fell by only 0.4%. The CSI 300 — made up of larger firms listed in both Shanghai and Shezhen — also outperformed, dropping by only 1.77% for the session.

At the other end of the spectrum, small cap stocks copped a pasting with the Shenzhen Composite, CSI 500 and ChiNext indices all plummeting by more than 4%.

The tech-heavy ChiNext index, in particular, was savaged, losing more than 5.5%.

According to a report from Bloomberg, the heavy selloff may have been triggered by signs China’s central bank, the PBOC, may refrain from adding additional monetary policy stimulus in light of a strong rebound in economic data in March, including credit growth.

Here’s Bloomberg, citing a story from the state-run new wire Xinhua.

While the People’s Bank of China hasn’t issued an official statement of a change in policy stance, the first signal of a shift came Monday in a commentary by the state news agency Xinhua. While monetary policy will maintain a certain degree of looseness in coming months, prudence will feature more prominently than last year, Xinhua said.

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