China stocks slip as absence of policy measures adds to worries

Bloomberg

Chinese equities fall on Monday as traders remained concerned about whether there would be adequate policy support to spur growth after lenders left the borrowing costs unchanged.
The CSI 300 Index closed down 0.2% after falling as much as 1%. Rate-sensitive financial firms and property developers weighed on the market. The Hang Seng China Enterprises Index, which tracks Chinese companies listed in Hong Kong, dropped 1.7%, reversing an earlier advance of as much as 2.2%.
Traders were disappointed after Chinese lenders left the loan prime rate unchanged on Monday and sought signs of other policies that may help sustain a recent rally. Speculation of more easing increased after a top financial committee led by Vice Premier Liu He on March 16 vowed to make monetary policy more “proactive” in order to boost the economy and stabilise financial markets.
“Some may have clung on to expectations for an LPR cut today, which I think will come later when they assess the growth drag from the outbreak,” said Wai Ho Leong, strategist at Modular Asset Management. “Peace talks and the Xi-Biden call also did not deliver substantive outcomes.”
Monday’s volatile trading session follows last week’s roller-coaster ride, when Chinese shares staged a stunning reversal after a historic two-day selloff as the authorities stepped in. The HSCEI gauge had jumped 21% in the span of two days, the most since 1998.
Whether the march higher will continue is another question. State-run Chinese Securities Journal continued to urge investors on Monday to be optimistic about the local stock market due to policy support. The newspaper also reported some 30 Shanghai-listed companies have proposed nearly 10 billion yuan ($1.6 billion) of stock buybacks this month to shore up confidence.
Meanwhile, a gauge tracking Chinese real estate developers fell as much as 3.7%. Moody’s said Beijing’s supportive measures won’t defuse default risks for developers and debt-laden China Evergrande Group
suspended trading. The CSI 300 financials index also underperformed the market, closing down 1.7%. Separately, China Eastern Airlines Corp. closed down 6.5% in Hong Kong after its Boeing Co. 737-800NG plane carrying 132 people crashed in China’s southwestern province of Guangxi.
Economists expect a cut in the reserve requirement ratio soon, as well as a possible reduction in the medium-term lending facility rate next month.
“There may be an initial let-down, but the expectations for policy loosening are still on the table, and we expect an RRR or rate cut to transpire in the second quarter,” said Gary Ching, vice president at the research department of Guosen (HK) Securities Co.
Traders also remain on guard over developments relating to the war in Ukraine following a meeting between Presidents Xi Jinping and Joe Biden on Friday. China’s top envoy to Washington pledged his country “will do everything” to de-escalate the tensions in Ukraine after Xi assured Biden that his country didn’t want the war.