SHANGHAI: Chinese stocks fell on Friday and ended the week in negative territory as investors’ previous enthusiasm about economic stimulus gave way to concerns about whether the policy support would be big enough to revive growth.
The blue-chip CSI300 Index closed down 2.8%, while the Shanghai Composite Index dropped 2.6%. For the week, the CSI300 index fell by 3.3%. Hong Kong markets were closed for a holiday.
China stocks have rallied over 20% since Sept. 24, fanned by stimulus news, but the momentum has slowed this week. The market is now focused on potential further fiscal stimulus announcements that could come out at a finance ministry press conference on Saturday.
“The question remains on the magnitude of the fiscal policies and the effectiveness of the policy implementation, which we believe are both needed to stabilise the property market,” and repair consumer confidence, said Vivian Lin Thurston, a portfolio manager at William Blair.
UBS analysts forecast a base case scenario of 1.5 trillion yuan ($212.07 billion) for special government bond issuance, with a best case of 3 trillion yuan.
Reuters reported last month that China plans to issue special sovereign bonds worth about 2 trillion yuan this year as part of fresh fiscal stimulus.
According to LSEG Lipper data, overseas China funds and exchange-traded funds (ETFs) have received a net $13.91 billion since Sept. 24, pumping up inflows so far in 2024 to $54.34 billion.
Much of that money has gone into ETFs, which have seen buying of $12.84 billion since Sept. 24, while mutual funds are still reporting net outflows of $11.77 billion for the year.
Nomura’s chief China economist Ting Lu said the National People’s Congress (NPC) is still the key “checkpoint” for the exact size of the extra budget.
“At the upcoming briefing, the (finance ministry) might still discuss additional funding via the issuance of CGBs (China government bonds), while the exact numbers will most likely be announced by the NPC Standing Committee later this month,” Lu said.
Most sectors declined, with information technology and healthcare shares among the biggest drags, down 5.2% and 5.0%, respectively, while real estate stocks were up 0.7%.
Brokers Guotai Junan and Haitong Securities rallied again to a maximum of 10% each on Friday, after the disclosure of merger details earlier in the week.
Intra-day volatility on the CSI 300 index has more than doubled to 24% in the past month.
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