(Bloomberg) — Chinese stocks fell to the verge of a correction in an indication of growing disappointment over the pace of stimulus rollout.
Most Read from Bloomberg
The CSI 300 Index (000300.SS) ended the day 0.6% lower, bringing its declines from an Oct. 8 high to just about 10%. A gauge of Chinese shares listed in Hong Kong swung between gains and losses before trading up 0.4% as of three:36 p.m. local time.
The market has been on a roller-coaster ride since late September, when a series of stimulus measures by the central bank unleashed a burst of optimism that’s now quickly cooling. As Beijing takes its time detailing a fiscal spending plan, skepticism is growing whether authorities are willing to deploy greater firepower to show across the economy and markets.
“This historic surge in momentum at the tip of September is after all unsustainable, and given how briskly markets rose, it could fall equally fast,” said Marvin Chen, a strategist at Bloomberg Intelligence. “But overall policy actions are moving in the precise direction at a quicker pace and when the dust settles, China equities should still trade in a better range than before.”
While a decline of 10% would push a benchmark right into a technical correction, the intense volatility gripping Chinese stocks of late has made such milestones less meaningful. The CSI 300 soared greater than 30% in about three weeks since mid-September before losing momentum.
Chinese investors have been split over whether the rally has already peaked out, or whether there’s room for further gains.
In a fund manager survey by BofA Securities performed Oct. 4-10, roughly half of the respondents saw as much as 10% upside potential for Chinese offshore stocks over the subsequent six months, while one other 33% saw gains between 10% to twenty%.
Nearly a 3rd of them said they’re constructing exposure on signs of easing, up sharply from just 8% within the previous month. Still, three quarters of the respondents said the market goes through a “structural de-rating.”
Property Stocks
The following key event is a press briefing by the housing minister on Thursday, where authorities may provide more details of measures to support the country’s slumping property sector and bolster economic growth. Any disappointment from that event may reignite a selloff.
Chinese property stocks jumped ahead of the briefing, with a Bloomberg Intelligence gauge of developer shares gaining as much as 10% after shedding 7% on Tuesday. The sector has been at the middle of investor focus, with stocks seeing wild swings as policy expectations waxed and waned.
Minister Ni Hong can be the newest senior economic official to talk in public concerning the government’s pivot toward stabilizing growth, after People’s Bank of China (3988.HK) Governor Pan Gongsheng, Minister of Finance Lan Fo’an and the chairman of the country’s economic planning agency, Zheng Shanjie.
The last two pressers by the National Development and Reform Commission and the MoF “have been disappointing so there needs to be no reason to lift hopes for the briefing tomorrow,” said Vey-Sern Ling, managing director at Union Bancaire Privee.
—With assistance from Abhishek Vishnoi and Jake Lloyd-Smith.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.