MSCI Inc.’s key gauge for Chinese stocks is on course for a technical correction as traders struggle to find catalysts ahead of a July meeting of the nation’s top leaders.
The MSCI China Index dropped as much as 2% on Thursday, taking declines from a May 20 high to about 10% intraday.
Tencent Holdings and Alibaba Group Holding were among the biggest drags on the gauge. The Hong Kong equity benchmark is also close to entering correction territory after a 2.3% decline Thursday.
A rally that propelled Chinese equities into bull markets earlier this year has been faltering as concerns persist over a patchy economic recovery. Investors have shifted their attention to the Third Plenum, the July meeting that has historically been a venue where the Communist Party announces big shifts in economic policy.
“I would say that markets are still in a consolidation mode while investors are awaiting the Third Plenum,” said Redmond Wong, market strategist at Saxo Capital Markets. “I am not expecting a major selloff from here.”
See also: China’s stock rally faces risk as retail enthusiasm seen cooling
Chart: Bloomberg
