China stocks give up early gains, end lower despite bullish propaganda
By Samuel Shen and Kazunori Takada
SHANGHAI May 6 (Reuters) - China stocks surrendered early gains and ended lower on Wednesday as fears of a deeper correction outweighed a chorus of upbeat official media commentaries which declared the bull market was not over.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen ended the session down 1.0 percent at 4,553.33 points, after rising more than 2 percent at one point in morning trade.
The Shanghai Composite Index retreated 1.6 percent, ending at 4,229.27, also erasing sharp early gains.
A liquidity-driven rally fueled heavily by borrowed money has seen China's major indexes almost double in the past year, despite deteriorating company earnings and slowing economic growth. That has triggered expectations of a sharp correction.
On Tuesday, China stocks suffered their biggest one-day loss in nearly four months, hit by a combination of factors including tougher margin trading rules, a fresh wave of listings and speculation of a hike in stamp duty on stock trading.
"The market will enter a correction phase, and it will be very volatile," Hao Hong, managing director of BOCOM International wrote in a research note on Wednesday.
"Expensive valuations, euphoric sentiment and slowing liquidity from margin lending expansion will challenge the market in the near term," he said.
But some analysts said the bull market was merely changing gear, not direction. Continuación...