SHANGHAI: China stocks declined on Monday, led by banking and energy shares, as President Xi Jinping’s policy blueprint underwhelmed investors, despite a surprise policy rate cut that sent bond yields lower and weakened the yuan.

There was also little appetite for risk-taking after US President Joe Biden decided to end his reelection campaign on Sunday, which investors said creates uncertainty and could roil global markets.

China’s blue-chip CSI300 Index fell 0.7%, snapping a seven-day winning streak, while the Shanghai Composite Index dropped 0.6%. The yuan weakened to a one-week low against the dollar while China’s benchmark 10-year treasury yields dropped roughly 1.9 basis points (bps).

China released a policy document on Sunday, outlining ambitions that were mostly already known, from developing advanced industries to improving the business environment. The blueprint, which presents no major policy shift, followed closed-door meetings of the Communist Party’s Central Committee, led by Xi.

“Beijing’s policy mainly supports the tech sector, so financial and energy shares, which had outperformed, are falling,” said Yang Tingwu, vice general manager of asset manager Tongheng Investment. “That’s why we’re seeing this sector bifurcation.” Financial stocks dipped 0.7% as Beijing’s reforms prioritised tech and manufacturing over the financial sector.

Investors also expect thinner margins for banks as China lowered a key short-term policy rate and its benchmark lending rates on Monday.

Some analysts interpreted the rate cuts as Beijing’s recognition of economic hardship and the need to support new sectors.

“If China wants to become a financial powerhouse, it must first become a giant in advanced manufacturing and technology,” said Yuan Yuwei, founder and CIO of Water Wisdom Asset Management.