While major overseas stock indexes slumped in the first two trading days of the week, the drops are unlikely to have a huge impact on China's A-share market, thanks to its relative independence and adequate liquidity, experts said.
The A-share market was closed on Monday and Tuesday due to the Mid-Autumn Festival holiday.
Following a slide on Monday, the Hang Seng Index in Hong Kong eked out 0.51 percent gain on Tuesday, with insurance companies and market consulting firms leading the rebound. The index closed at 24,099 points on Monday-the lowest level of the year. Property developers dragged down its performance, with Sinic Holdings shares tumbling by 87 percent on Monday and troubled property developer Evergrande shedding more than 10 percent by the close.
Li Lifeng, chief strategist at Huaxi Securities, said that the fluctuations of the Hong Kong stock market are the result of overseas investors' excessive worries over the domestic economy and policies. However, risks in the property market are under control and it's "hardly possible" to incur systematic risks, Li said. Better performing industries will soon lead a price rally as the valuation risks have been accounted for by the recent adjustments, he said.
Given the relatively low correlation between major overseas markets and the A-share market, the decline of overseas indexes is less likely to exert an impact on the benchmark A-share indexes, said experts from Guotai Jun'an Securities.
Zhu Hong, investment director of Nuode Asset Management, said the overall market liquidity in the A-share market is still adequate to stimulate further economic growth. Taking into account the central regulator's tighter grip on property market speculation and the crackdown on the rigid payment of asset management products, there is a lack of investment targets in China.
Therefore, the A-share market will continue to be the major channel for household investment in the mid to long term, with major indexes ticking up through fluctuations. Healthcare, new energy, technology and consumption companies may provide the most opportunities, Zhu said.
The Singapore-traded FTSE China A50 futures, which are used to hedge exposure to stocks listed in Shanghai and Shenzhen, closed 3 percentage points lower on Monday.
The correlation between the Hang Seng Index and the FTSE China A50 futures has been high since late July, with both slumping by over 10 percent. However, a correlation is not found in the A-share market, as the Shanghai Composite Index has gained more than 2 percentage points over the same period, said Guotai Jun'an experts.
The benchmark Shanghai Composite Index and Shenzhen Component Index both reported gains on Friday, the last trading day before Mid-Autumn Festival.
The combined trading volume of the Shanghai and Shenzhen bourses topped 1.33 trillion yuan ($206 billion) on Friday, marking the 43rd consecutive trading day that the total trading volume of the A-share market exceeded 1 trillion yuan. Similar trading activity was seen during the bullish period of the A-share market in 2015 from May to July.
More details about the highly anticipated Beijing Stock Exchange were released when the market closed on Friday. Retail investors with at least 500,000 yuan worth of assets in their securities accounts during the most recent 20 trading days will be qualified to trade on the new bourse. The 500,000 yuan threshold is a major reduction from the 1 million yuan level adopted at NEEQ Select, which the BSE is founded on.
By setting such a threshold, the number of individual investors at the Beijing bourse is expected to double. As trading activity of existing investors increases, market liquidity will be largely increased, said analysts at Kaiyuan Securities.
(Editor:Wang Su)