China’s stock market turns subdued again as investors await clear policy signals

Calm has returned to Chinese stocks, as traders refrain from aggressive bets and closely watch how pro-growth policies are likely to play out amid accelerating inflation.

Volatility on the CSI 300 Index of the biggest companies trading on the Shanghai and Shenzhen stock exchanges has fallen to the lowest level since February 2018, measured on a 30-day and 100-day basis, according to Bloomberg data. Six months ago, price swings on the gauge were close to their highest in almost three years.

The sharp decline in the volatility underscores the prevailing cautious sentiment on China’s stock markets, as policymakers take steps to stabilise growth and curb consumer inflation.

While China’s growth slipped to the slowest pace on record in the third quarter, inflation quickened to a seven-year high last month amid surging pork prices. The People’s Bank of China however has refrained from cutting its benchmark interest rates to spur the economy, even as the Federal Reserve lowered borrowing costs for the third time this year in late October to sustain US economic growth.

“The market isn’t too clear about the tone of the policies,” said Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai. “More of the policy intent needs to be known before further action can be taken.”

That is in contrast to Hong Kong’s stock markets, where volatility risen to a one-month high along with the escalating anti-government protests.