China’s stocks stabilise after falling most in five months as traders await key economic data

China’s stocks recovered from the biggest plunge in five months, as traders weighed the sustainability of the rally and watch out for more economic data on the performance of the world’s second-largest economy.

Mainland traders might not have been totally caught off guard by Friday’s shake-out as technical indicators, such as the relative strength index were already at elevated levels, signalling a sell-off was just a matter of time.

With the nation’s annual legislative meetings continuing in Beijing and the release of key February economic data, investors will need to read between the lines of comments from policymakers and parse data for clues for their next moves.

At a press conference on Sunday, China’s central bank governor Yi Gang said there was still room to further lower banks’ reserve requirement ratios in addition to the five cuts since last year, but it would be limited.

Meanwhile, data from the central bank also showed growth in new lending and aggregate financing slowed last month after both hit record highs in January.

Brokerage Shenwan Hongyuan Group said the slowdown in lending was because of the seasonal distortion caused by the Lunar New Year, and that credit supply will continue to improve for the rest of the year.