Profit-taking saw Chinese equities snap a ten-day winning streak on Wednesday, but analysts say it's just a small hiccup in what could be another stellar year for mainland stocks.
The benchmark Shanghai Composite closed down 0.8 percent on Wednesday after ten straight sessions of gains. Year-to-date, the benchmark index is up 12 percent, adding to last year's over 50 percent rise.
"China must be one of the most speculative markets in the region now, so I wouldn't read too much into it. It could be spiraling up one day and spiraling down the next," said Hugh Young, MD & global head of equities at Aberdeen Asset Management.
The upswing in mainland stocks has been premised on speculation that the People's Bank of China (PBoC) will roll out additional easing to ensure that the government achieves its 2015 economic growth target of "around 7 percent".
The PBoC's first step came in November when it reduced the one-year benchmark lending rate by 40 basis points and the one-year benchmark deposit rate by 25 basis points. On February 28, it followed up with a 25-basis-point cut in the benchmark interest rate.
Analysts expect additional easing in the form of interest rate or reserve requirement ratio (RRR) cuts after Premier Li Keqiang said the government still has room to maneuver its policy. Li's comment, made in the closing session of the annual National People's Congress (NPC) in early March, indicated that authorities may do more to prop up China's stumbling economy.
More upside ahead
Amid expectations for additional stimulus China's stock market is likely to pop further, analysts say.
"We think the A-share market is repeating the 2005-07 bull market due to policymakers' support, monetary easing cycle and with stocks trading cheap to history," Jonathan Garner, MD & chief Asia and emerging market equity strategist at Morgan Stanley, wrote in a note.