China Stocks Tumble Amid Bond Market Shifts

China's stock market hit six-month lows amid fears of bond selling and shaky economic fundamentals. Despite regional market rebounds, Chinese stocks underperformed. Long-term yields surged, and the yuan dipped from a recent high. Analysts suggest markets await mid-year earnings and potential Fed rate cuts for clarity.

China's stock market dropped to six-month lows on Tuesday despite a regional relief rally. The yuan also slid from Monday's seven-month high against the dollar, challenging beliefs that Chinese assets could serve as a safe haven amid a global market downturn.

Long-term yields in China rose, driven by fears of government-orchestrated bond selling designed to cool a hot rally, rather than indications of a brighter economic outlook. Monday saw Chinese and Hong Kong stock markets outperforming amid sharp declines in Japan, South Korea, and Taiwan. However, Tuesday saw these markets falling outside the regional recovery trend.

The bluechip CSI 300 Index ended the day flat, reaching its lowest point since February despite starting higher. The Shanghai Composite Index closed up 0.2%, while Hong Kong's Hang Seng fell 0.3% after hitting its lowest since April 22. The onshore yuan traded at approximately 7.1450 per dollar, significantly lower than its seven-month peak of 7.1120 reached on Monday.

(With inputs from agencies.)