China's battered stock market has taken another tumble this week – a sign perhaps that the country's investors are bracing for a faster-than-anticipated slowdown in the world's second largest economy.
The Shanghai Composite stock index tumbled more than 2 percent on Monday and extended that fall on Tuesday to its lowest level in more than a week before recovering a touch. Chinese shares are down almost 14 percent so far this year, making Shanghai Asia's worst performing major equity market.
"If you look purely at the Shanghai Composite, it has a massive retail component so it's very much driven by sentiment rather than the earnings growth that professional traders look at," said Chris Weston, chief market strategist at trading firm IG.
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"So I would look at the Shanghai Composite as a good gauge of sentiment in China. And what we're looking at in China right now are clear risks to growth - whether that turns into a hard landing or a more manageable slowdown remains to be seen," he added.
Weak data in recent months have prompted economists to cut their gross domestic product (GDP) growth forecasts for China, while Beijing's tolerance of a credit squeeze last month and its determination to push ahead with structural reforms have added to the jitters about China's growth outlook.
The Chinese government said on Friday that it would cut off credit to those industries beset by overcapacity as it tries to end the economy's dependence on investment funded by cheap debt. The statement fueled the sell-off in Chinese shares on Monday.