2014.08.0606:09:09UTC+00Chinese stocks drop on poor energy performance

Chinese stocks lost the most for the month as financial and energy companies dragged the benchmark index down along with the speculation that the rally of the index is overdone.

The Shanghai Composite Index is set for its biggest drop since July 9 as it shed 0.8% to 2,202.44, 10:06 am, Shanghai time. Developer of market-timing indicators, Tom Semark said that the gauge was able to recover from the year’s low however, it might end its steady incline in the past trading sessions within days, losing approximately 10%.

Yanzhou Coal Mining Co. dropped by 1.4%, reducing its recover for the year down to 30%.Coal miner Wintime Energy Co. fell by 1.7% following a 94% rise from July 22nd of this year. Poly real Estate Group Co. and Ping An Insurance Group Co. are in the bandwagon, losing at least 2.2%. The mentioned companies led the decline among the benchmark indexes’ biggest laggard, the financial, property, and energy groups.

Analyst at Tebon Securities Co., Zhang Haidong, told Bloomberg that the Chinese market climbed too much lately that’s why there is several profit taking. Haidong adds that the current trend would continue for one to two weeks more that should halt at around 2,150. Haidong believes that the uptrend will still extend after that with the incline becoming gradual.

The index relative-strength index of China is currently at 77.8 and trades at 8.2 times estimated 12 month earnings. Comparatively with the low on March which is 7.27, this has been an improvement. China is seen as one of the market that’s outperforming the other 46 emerging and developed countries as its $3.5 trillion stocks circulate. This is seen as an indication that the measures of the Chinese government are working with the monetary easing, accelerated government spending, and good manufacturing data that will lead to a quicker economy growth incline.