China stock market’s correction will continue over the next few months and investors should brace for more volatility, according to one fund manager. ‘This is a correction that has been caused by some previous over-enthusiasm and it’s anyone’s guess as to how big and how long that will be,’ declared Charlie Awdry, who manages the China Opportunities Fund. Awdry said while he can’t predict whether the Shanghai Composite index will have another big single-day drop, he does believe that a lot of the market is still very expensive. On Tuesday, the benchmark index closed down 1.7%, off the worst declines of the session. That followed Monday’s 8.5% decline, the biggest one day drop since 2007. ‘The Shanghai market is dominated by retail investors. They tend to chase fashionable stocks up to high valuations, so if you do look at certain areas like technology in the Shanghai market they’re extremely expensive, and that part of the market could fall quite a lot,’ said Awdry. He added that other areas of the market, like large cap consumer staples stocks, offer better value, and that valuations of Chinese shares listed in Hong Kong and the U.S. look more attractive.
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