Chinese stock markets reopen after holiday break to face fresh bout of selling as Beijing’s stimulus support disappoints

Chinese stocks extended losses forcing market benchmarks to breach significant technical milestones on Monday amid growing realisation that Beijing will refrain from any big-bang stimulus to revive economic growth. Analysts say investors will have to rein in their expectations about any aggressive government support even after China’s weaker-than-expected economic reopening.

The CSI 300 Index fell by as much as 1.6 per cent on Monday, as China’s onshore markets resumed trading after a two-day closure for the Dragon Boat Festival. It closed 1.4 per cent lower at a level not seen since June 7 and capped a fourth straight day of declines, its longest losing streak since May 19. It also dipped below the 200-day moving average, a technical barometer that provides support and resistance. Levels above the mark signal an uptrend, while below that a downtrend.

The CSI 300 Index, which tracks the 300 most valuable stocks on the Shanghai and Shenzhen exchanges, has dropped nearly 9.3 per cent from a January high, erasing almost half the gains fuelled by the optimism around the economic reopening following China’s removal of the Covid restrictions late last year.

The fresh bout of selling is evidence that investors are frustrated with what policymakers have unveiled so far to revive growth, including a 10 basis-point cut in benchmark lending rates and some piecemeal fiscal measures such green-energy vehicle subsidies. Both Citic Securities and Shenwan Hongyuan Group say that investors will need to reset their policy expectations, with the government prioritising sustained and high-quality growth.

“Policies will not be absent, but they will hardly exceed aggressive market expectations,” said Qiu Xiang, a Beijing-based strategist at Citic Securities, the nation’s biggest publicly traded brokerage. “Odds are low that the government will pursue strong stimulus measures and a strong recovery.”