China stocks rebounded on Friday as markets took a breather after sharp losses in the previous session, while investors awaited policy messages from Chinese and global leaders gathering in Shanghai for a G20 meeting. The CSI300 index of the largest listed companies in Shanghai and Shenzhen, which tumbled more than 6 percent on Thursday, climbed 1 percent to close at 2,948.03 points.
For the week, the index ended down 3.4 percent, its biggest such decline in three weeks and taking its losses for far this year to 21 percent. But fears of tighter liquidity and worries about the economy kept many investors on the sidelines, traders said. The Shanghai Composite Index rose 0.95 percent to 2,767.21 but finished the week down 3.2 percent, also its biggest loss in three weeks.
G20 finance chiefs and central bankers meet on Friday and Saturday. Current market turmoil and a global economic slowdown are expected to be key topics of discussion. Chinese officials have gone out of their way this week trying to reassure jittery global investors and the country's major trading partners about the health of the slowing economy and pledging to keep the yuan currency relatively stable and policy accomodative. But Xiao Shijun, analyst at Beijing-based GuoDu Securities, said investors' confidence in the market remained fragile.
"The markets are not doing well as the economic fundamentals are not that good too," Xiao said. Traders and analysts cited a confluence of reasons for the slide in addition to profit-taking on Thursday, including fears of tighter liquidity, worries about the economy, and anxiety over looming liberalisation of initial public offerings (IPOs), which could result in a flood of new supply that could trigger a cash crunch. "Mainland investors are still panicky," said Steven Leung, a sales director at UOB Kay Hian in Hong Kong. "Concern over tighter liquidity prevent them from taking any big position." However, weak sentiment in the mainland market failed to pull interest away from the Hong Kong stocks. Brokers said investors started to build up their positions after corporate earnings such as AIA and HSBC.