Following a massive market intervention last week, we saw the first relatively signifi-cant market correction yesterday. CSI300 Index dropped 3.6%. As margin financing balance fell significantly from RMB2.27trn in mid-June to RMB1.44trn on Tuesday, systematic risk of the market has been largely reduced, according to Galaxy Futures, a subsidiary of China Galaxy Securities [6881.HK]. It may suggest a lower index level is acceptable from the authorities’ perspective, as systematic risk is now lower. Meanwhile, after the market turmoil in the past few weeks, the authorities are likely to tighten control on leveraged trading activities, especially OTC margin financing. It implies less liquidity in the market and will limit further upside of the index. From a technical perspective, Galaxy Futures believes 4,300 for CSI300 is a very strong resistance level (yesterday closing: 3,966.76). The first target is 3,300-3,500. It may sounds relatively bearish for some investors. But CSI300 index futures for August was closed at 3699.2 yesterday, only 5.7% above the high-end of the target (3,500).