The CSI 300 Index fell as much as 2.4%, the most since March 19. Liquor giant Kweichow Moutai Co. and China Merchants Bank Co. were among the top drags on the benchmark, each dropping around 4%. The gauge gained nearly 3% over the 11 sessions through Thursday, led by information technology and health-care stocks.
“There were some funds betting on a safety window and stability in the market leading up to the centennial,” said Hua Tong, a fund manager at Shenzhen Zhengyuan Investment Co. “Now that the event has passed, they are retreating without that perceived layer of safety.”
Authorities were targeting financial stability before Thursday’s ceremony and amid the tightening interbank funding environment at the end of the second quarter. The People’s Bank of China last week increased its short-term cash injection for the first time since March to soothe liquidity concerns. But it scaled back the additions as soon as the new quarter began, leading to net drainage of funds from the financial system.
“Investors went into the centenary yesterday with high expectations and market performance somewhat disappointed,” said Amy Lin, an analyst at Capital Securities. “Many turned sellers today. PBOC’s net withdrawal of liquidity didn’t help.”
©2021 Bloomberg L.P.