(Bloomberg) — A rally in Chinese shares slowed after the market jumped in the previous session, underscoring the need for authorities to take more forceful steps to sustain the nascent market recovery.
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The benchmark CSI 300 Index closed up 1% after swinging between gains and losses earlier in the day. The advance in smaller stocks also slowed, with the CSI 1000 gauge climbing 4.5% versus 7% Tuesday. The momentum was weaker in Hong Kong, where an index of mainland firms fell 0.8%.
The volatile trading suggests investors remain skeptical about whether Beijing will ramp up its rescue campaign with even stronger measures, following a slew of fresh support moves ranging from wider trading curbs to a pledge by the nation’s sovereign wealth fund to boost equities holdings. All eyes are now on a reported plan by regulators to brief President Xi Jinping on markets.
“It’s not unexpected for the bounce yesterday to be short-lived,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Sentiment is still choppy. We still need to see more determination to resolve structural issues or at least some improvements in the macro environment.”
Overseas investors boosted their holdings of onshore shares for a seventh day.
Pressure is mounting on Beijing to act more quickly and resolutely to stem a $7 trillion stock rout that poses a growing threat to financial and social stability, at a time when the world’s second-largest economy is mired in woes from a housing crisis to deflationary pressures. It’s also crucial for policymakers to prevent a weak stock market from further damping consumer demand as China enters the Lunar New Year holiday week.
The rescue measures rolled out so far have mostly been piecemeal in nature, including wider trading restrictions on investors including quantitative hedge funds, as well as moves such as guiding brokerages to adjust margin call levels. Earlier efforts included curbs on short-selling as well as state buying of shares in the nation’s largest banks.
Despite the latest rebound, the CSI 300 remains 2.6% lower for the year and among the world’s worst-performing major indexes.
“Ultimately what’s gonna be driving the stock market, it has to be from improving fundamentals. For such a large economy, unfortunately it would take time,” said William Yuen, investment director for Invesco in Hong Kong.
–With assistance from Ishika Mookerjee and Jeanny Yu.
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