(Yicai Global) July 17 -- China remains a bull market in the medium-term and investors do not need to be too concerned about the blip in the mainland stock markets yesterday, a chief economist told Yicai Global.

China’s major stock indexes, which saw record high turnover in the first two weeks of this month, dropped by as much as 6 percent yesterday.

The sell-off had to do with investors cashing in on the previous high returns in the Shanghai and Shenzhen stock markets, said Li Zongguang, chief economist at investment bank China Renaissance. The food and beverage, consumer services, medical, communications, computer and electronics sectors were the main losers when previously they had spearheaded the growth, he added.

We don’t need to be too pessimistic about the short-term market because the Chinese government continues to ensure there is sufficient liquidity, he added. Today the People’s Bank of China pumped a further CNY200 billion (USD28.6 billion) into the markets through seven-day reverse repurchase agreements.

China’s capital market remains attractive to foreign investors who seek to avoid risk or are looking for profits, he said. Chinese yuan bonds have high coupon rates in contrast to negative interest rates in other countries, Li said. There are an abundance of stocks with good investment returns that cannot be found elsewhere. .

After a record contraction in the first quarter, gross domestic product bounced back to 3.2 percent growth in the second quarter, demonstrating that the economy is on the mend and that the novel coronavirus outbreak is under control, he added.

“The market’s fundamentals haven’t changed, neither has the general trend,” he said.

Editors: Tang Shihua, Kim Taylor