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China’s blue-chip index suffered its worst one-day fall in 17 months on Thursday, as investors used concern over bond yields and tough new regulations targeting corporate debt as an excuse to take profits following a strong market rally.
Investors pushed the yield on China’s 10-year sovereign bond up 1.7 basis points, taking it back over 4 per cent, a level it has crossed above four times in November.
This is the latest milestone in a bond rout that has extended over most of this year.
Analysts say the both bond turmoil is the result of the government’s increasing determination to rein in runaway debt growth. But the link to the stock market is less clear.
“In the first half, the big name shares rose so much. As year-end evaluations approach, people want to cash out and lock in their profit numbers,” said Dong Chunxiao, equity strategist at Pacific Securities in Beijing. “Rising bond yields may have contributed factor, but I don’t think it’s the driving force.”
The CSI300 index, which tracks the largest companies traded in Shanghai and Shenzhen, closed 2.9 per cent lower, its worst loss since June 2016.