Chinese stocks plunge

Just a day after I wrote that the Chinese stock market was surging, it plunged. From Bloomberg:

China's stocks fell the most in a month as investors judged gains this year to be excessive relative to earnings growth potential. China Minsheng Banking Corp. and China Merchants Bank Co. led declines...

The benchmark CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, fell 129.78, or 3.5 percent, to close at 3604.64, the largest decline since April 19. It was the biggest fluctuation among equity markets included in global benchmarks. The measure had gained 83 percent this year before today.

Credit Suisse Group expects mainland policy makers to take steps to cool the local stock market. These may include raising interest rates, taxing share transactions, selling state-owned shares or the use of "harsh comments" by senior officials...

Equities also fell after China's securities regulator ordered the country's fund management companies to not get involved in speculative buying of shares, state-run Securities Times reported, citing a circular from an unspecified regulator.

The state of the Chinese economy apparently wasn't a direct concern.

Retail sales climbed 15.5 percent to 667.3 billion yuan ($86.8 billion) last month after gaining 15.3 percent in March, the National Bureau of Statistics said today. That was the biggest increase since May 2004 when the first two months of each year are combined to eliminate Lunar New Year holiday distortions.

Interestingly, the rest of Asia was little affected by the Chinese market this time. Instead, Japan pulled the rest of Asia down on weak economic data. Again from Bloomberg:

Asian stocks dropped after Japanese machinery orders unexpectedly fell and metals prices slumped...

Japan's benchmarks led the decline as the 4.5 percent drop in machinery orders in March dented expectations for regional economic growth that has helped fuel a four-year rally in the Morgan Stanley Capital International Asia-Pacific Index...

MSCI's Asia-Pacific index dropped 0.9 percent to 148.32 at 7:28 p.m. in Tokyo. The Nikkei 225 Stock Average fell 1.1 percent and the broader Topix index retreated 1 percent.