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The Chinese stock market is expected to stay steady despite the sharp declines experienced across its major indexes last week, which were part of mid-term corrections. The Shanghai Composite Index dropped 3.9% to 3,834.89 over a five-day trading period ending November 21. Meanwhile, the Shenzhen Component Index declined 5.1% to 12,538.07, and the ChiNext Index fell 6.1% to 2,920.08.
Market analysts suggest that these technical corrections are already underway and there might be further impacts from declines in U.S. and European stocks, potentially affecting Chinese markets. However, the early stages of these corrections indicate that the overall positive trend long term remains intact.
Throughout the day, the indexes continued their downward slide, with the Shanghai Composite dropping 0.3%, the Shenzhen Component decreasing 0.6%, and the ChiNext Index falling 0.8% during the lunch break.
Despite short-term hurdles, longer-term growth prospects of the market are expected to hold, with some experts urging investors to remain patient and keep some positions open to capitalize on future opportunities. The recent global stock downturn was attributed to waning expectations for interest rate cuts by the U.S. Federal Reserve this year. Experts note that while there is a short-term inertia suggesting some instability, the broader upward trend persists.
In the artificial intelligence sector, recent fluctuations are deemed natural and consistent with historical market patterns. The characteristic “double-phased bull market” cycle continues, and after corrections, investors are advised to wait for fundamental improvements to signal the start of the next bull phase.
The current bull market remains promising in both duration and potential, according to analysts. Maintaining a sustained bull run hinges on liquidity improvements and a strong correlation between the market and underlying fundamentals over longer periods. Therefore, focusing on the realization of fundamental growth expectations is strategic for investors who envision a long-term bullish trend.
The ChiNext Index, representing the 100 most liquid and prominent stocks on the Shenzhen Stock Exchange’s innovative technology board, acts as the core driver of this bullish phase. Recent declines are viewed as normal pullbacks within the bull cycle, with some experts emphasizing that these corrections are within manageable ranges.
In fact, the index’s retreat since October has not exceeded the typical 20% correction seen in past bull markets, nor has it approached the maximum drawdowns of the past five years. These fluctuations are primarily driven by profit-taking and emotional trading; investors are advised to avoid buying into what feels like top-tier stocks during peaks or panicking and selling in downturns. Instead, they should focus on high-quality growth stocks demonstrating strong performance.
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