China’s benchmark indexes slumped roughly 3 percent on Wednesday in their worst daily performance in five weeks as a correction in small-caps deepened through the day, triggering an afternoon sell-off in the broader market.
The blue-chip CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 2.9 percent, to 3,473.25, while the Shanghai Composite Index lost 3.1 percent, to 3,320.68 points.
For both indexes, the plunges were the biggest since Sept 15.
“The correction, which is technical in nature, is natural after the strong rebound we saw recently. Many stocks were up by their limit for several consecutive days,” said Samuel Chien, partner of Shanghai-based hedge fund BoomTrend Investment Management Co.
Chien said he expected the market to remain volatile.
The root of Wednesday afternoon’s selling binge was the start-up board ChiNext, which tumbled over 6 percent on profit-taking, weighing on the Shenzhen market.
The tech-heavy board had come back about 40 percent from its mid-September low, leading the rebound in the broader market.
But with ChiNext shares trading at over 80 times their earnings, many questioned sustainability of the rally. Such controversy was reflected in the board’s trading volume, which hit a record high on Wednesday.
All main sectors, with the exception of banking ended Wednesday’s session down.
Heavily bruised sectors include IT, energy and commodities.