“The sell-off was and is an impact of regulatory tightening,” Lauren Gloudeman, a research analyst with Rhodium Group’s China markets research team, told CNBC.
Glouderman argued that the new policies limit the scale to which banks can keep riskier items off balance sheets, which has caused some local non-financial institutions called “trust companies” to exit their stock holdings.
“We don’t know how much [of]the deleveraging process has yet to take place,” Sean Darby, chief global equity strategist at Jefferies, told CNBC. “In a way the stock market is a leading indicator on the economy because of liquidity concerns.”
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