Profit-taking in many China stocks ... drove the market as well as H-shares into negative territory.

Most H-shares have reached irrational highs so investors are now taking profit.

Overbuying of China stocks was obvious in the last two weeks. Investors are taking profits gradually, but some are still chasing laggards such as commodity stocks.

The market seems to be overshooting. The metal stocks are going crazy.

The market just showed mild profit-taking in morning trade but the losses were limited. It turned higher in the afternoon as funds started buying blue chips such as China Mobile again.

China-related stocks will likely to be hit by the austerity measures. I expect further correction in China stocks in the short term.