China's stock market rebound showed signs of fatigue on Thursday, with main indexes giving up initial gains and ending lower, as profit-taking threatens to erase optimism fuelled by stimulus hopes. The bluechip CSI300 index fell 0.3 percent, to 3,053.70, while the Shanghai Composite Index lost 0.2 percent, to 2,862.89 points. January inflation data showed little improvement in economic activity, underlining the need for more policy support.
China stocks were also firmer, with investor optimism sustained by Beijing's fresh moves to support the economy, and expectations that more stimulus is in the pipeline. The energy sector gained 4 percent, with Chinese oil giants PetroChina, CNOOC and Sinopec posting sharp gains on higher oil prices.
After solid rallies over the past few sessions, investor sentiment in China remained upbeat amid signs it is stepping up efforts to arrest economic deceleration. There have been announcements of infrastructure investment, and policies unveiled to reward academic research. Earlier, Beijing unveiled rules to strengthen financial support to the industrial sector. Newly-released January inflation data on Thursday - which points to persistent deflationary pressure and little improvement economic activity - reinforces expectations of more monetary easing, a move made easier by a stabilizing yuan.
"Disinflationary pressure remains and leaves room for further monetary policy easing," Nomura said in a research note, forecasting that China this year will make four 50 basis-point cuts in reserve requirement ratios and two 25-basis-point reductions in policy rates. Most sectors on the mainland rose, with rate-sensitive sectors such as real estate performing strongly. Climbing global oil prices helped Chinese energy firms, pushing the sector up 1.6 percent.
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