China stocks slide as hopes for politburo boost sputters out

Bloomberg

Chinese equities and the yuan extended losses on Wednesday afternoon, gaining downward momentum as concern over possible higher US tariffs overwhelmed optimism about Beijing’s pledge to support economic growth.
The CSI 300 Index of large mainland-listed companies slid 2 percent, its biggest loss in a month. The offshore-traded yuan fell 0.17 percent to 6.8170 per dollar, while the yuan neared the weakest on record against a trade-weighted basket of currencies. The Hang Seng Index dropped 0.9 percent, erasing a gain of 0.7 percent, and the yield on 10-year government bonds slid 1 basis point.
“The policies released from the Politburo meeting overnight weren’t anything surprising,” said Steven Leung, executive director at Uob Kay Hian (Hong Kong) Ltd. “The selling is mainly because of a lack of investor confidence. We need something more drastic to change the view of investors.”
A communique issued after a Tuesday evening meeting of China’s 25 most senior leaders said the campaign to reduce leverage would continue at a measured pace, while noting that the external environment had “significantly changed.” According to people familiar with the deliberations, the US is considering more than doubling planned tariffs on $200 billion in Chinese imports.
“Markets are still worried about further developments in the trade war,” Leung said. “It’s quite difficult for them to reach any agreement in the near term. People are still worried about the deterioration of fundamentals in the second half.”
Property developers continued to slide on Wednesday, after the Politburo vowed to clamp down on home-price gains. The local government in Shenzhen also revealed new tightening measures. Five of the worst 10 performers on the Hang Seng Index were real estate companies, led by Country Garden Holdings Co., which slid 6.6 percent. The company also suffered a fatal accident at one of its sites.
“Even if the trade war issue has been fully priced in, it doesn’t mean stocks will rebound as there are few positive catalysts,” said Hao Hong, chief strategist at Bocom International Holdings Co. “Don’t expect any aggressive liquidity easing and property loosening. The policy tuning is for China to solve challenges more flexibly, and the policy orientation has always been the same.”
Materials and industrial companies were among the best performing stocks earlier in the day, boosted by a Politburo call for more infrastructure investment. But their gains evaporated, as did those of technology shares, which for a brief moment looked set for a rebound after being beaten down in recent days.