The probe into the finance industry comes as the government widens an anti-corruption campaign and seeks to assign blame for the selloff earlier this year. Authorities are testing the strength of a nascent bull market by lifting a freeze on initial public offerings and scrapping a rule requiring brokerages to hold net-long positions, just as the earliest indicators for November signal a deterioration in economic growth. A Chinese fertilizer maker and a pig iron producer became the latest companies to flag debt troubles after at least six defaults this year.

“The sharp decline will raise questions whether the authorities’ confidence that we are seeing stability in the Chinese markets may be a tad premature,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore. “The rally since the August collapse was not fundamentally supported. The removal of restrictions for large brokers to sell and the IPO resumptions may not have been announced at an opportune time.”

David Fuller's view

As the world’s second largest economy - approximately US$ 10tr versus the USA’s $17tr – difficulties in China cast long shadows, particularly regionally. 

Judging by today’s action in the Shanghai A-Shares and also the Hong Kong listed HSCEI H-Shares, it would be hard to disagree with Bernard Aw’s comments in the paragraph immediately above.  Valuations are not high but it looks as if basing activity will continue for a while longer.  Clear upward dynamics on the charts above are required to indicate that demand is regaining the upper hand.