Chinese stocks ticked up on Monday on expectations of further policy support, but trading remained subdued as investors awaited cues from the US-China trade negotiations at the G20 summit later this month. At the close, the Shanghai Composite index was up 0.2% at 2,887.62, while the blue-chip CSI300 index was flat.
CSI300's financial sector sub-index ended 0.4% higher, the consumer staples sector lost 1%, the real estate index was down 0.3% and healthcare shares gained 0.4%.
The smaller Shenzhen index ended down 0.2% and the start-up board ChiNext Composite index was weaker by 0.8%.
US President Donald Trump said on Friday "it doesn't matter" if Chinese leader Xi Jinping attends the G20 summit later this month, predicting a trade deal with Beijing would occur at some point anyway. "The market has been trading sideways. People are waiting for the G20 meeting," said Patrick Yiu, managing director at CASH Asset Management, who sees the Shanghai index trading roughly within a range of 2,830-2,950 before the summit.
The US Trade Representative's Office on Monday will kick off seven days of testimony from US retailers, manufacturers and other businesses about Trump's plan to hit another $300 billion worth of Chinese goods with tariffs.
The US Federal Reserve is meeting on June 18-19, with a press conference scheduled for a second day. Markets are almost pricing in a 25 basis point cut for July.
More dovish policies by central banks worldwide could afford the People's Bank of China (PBOC) more room to ease interest rates, according to a Great Wall Securities note published on Monday.
The Chinese central bank said the second phase of a cut in the reserve requirement ratio freed about 100 billion yuan ($14.44 billion) worth of long-term funds. In open market operations, it injected 150 billion yuan via 14-day reverse repos.
On Friday, China's central bank said it will increase the re-discount quota by 200 billion yuan and the standing lending facility quota by 100 billion yuan hours after the country reported that industrial output growth unexpectedly slowed to a more than 17-year low in May.
Authorities may rely more on fiscal policy to provide support, said Tai Hui, chief market strategist for Asia at J.P Morgan Asset Management. "The government is still very mindful. Don't expect massive liquidity that could raise corporate debt level or create speculative activity in the markets."
Trading was quiet ahead of the expected Trump-Xi meeting. About 15.40 billion shares were traded on the Shanghai exchange, lowest since February 1. The volume in the previous trading session was 21.54 billion.
So far this year, the Shanghai stock index is up 15.8% and the CSI300 has risen 21.4%. Shanghai stocks have declined 0.4% this month.