(Bloomberg) -- Chinese stocks listed on mainland markets eked out a modest gain after a holiday break, seeking to catch up to Hong Kong equities’ momentum amid calls for major economic stimulus.
The benchmark CSI 300 Index closed up 0.4% after fluctuating throughout the day, as investors debated whether weaker macro data will prompt the government to bolster stimulus. The energy sector led the gauge’s rise. Hong Kong is closed for a holiday on Wednesday.
Disappointing economic data over the weekend has added pressure on the authorities to ramp up fiscal and monetary stimulus if the nation is to reach this year’s growth target. Failure to achieve that figure may further undermine investor confidence, with overseas funds already pulling a record amount of money out of the country in the second quarter.
“The market is expected to continue fluctuating as investors are still waiting to see if China will roll out more stimulus policies,” said Shen Meng, a director at Beijing-based investment bank Chanson & Co. “The impact from other markets such as Hong Kong and the US will be short-lived.”
A rebound in Chinese equities earlier this year has lost momentum, with the CSI 300 Index closing at its lowest since 2019 last week. Declines may increase in absence of a forceful stimulus.
To counter economic woes, the nation may cut banks’ reserve requirement ratio in coming months, according to a report by state media China Securities Journal, which cited analysts. A central bank official earlier signaled that “there’s still certain room” to lower the ratio, according to the report.
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Investors largely ignored new data — including a pickup in the pace of home price declines — that underscored the nation’s persistent property slump. The CSI 300 Real Estate Index, which tracks major onshore-listed developers, rose 2.4%.
Still, China needs a restructuring due to its real estate challenges, Ray Dalio, founder of Bridgewater Associates, said during a Bloomberg Television interview on the sidelines of the Milken Institute Asia Summit on Wednesday. “It’s a situation that’s more challenging than Japan in 1990,” he added.
Some consumption-related stocks underperformed as the latest retail sales disappointed and the seasonal travel outlook remained murky.
China’s domestic tourism spending during the Mid-Autumn Festival holiday rose compared to pre-pandemic levels, but analysts remained cautious about a sustainable consumption recovery and kept their expectations in check for the upcoming National Day holiday.
“Seasonality is considered to be weak this year,” Jefferies analysts including Thomas Chong wrote in a note.
Tour operator Yunnan Tourism Co. declined 4%, while retailer China Tourism Group Duty Free Corp., and movie company Wanda Film Holding Co. both dropped about 2%. Liquor maker Kweichow Moutai Co. also ended the day nearly 3% lower.
Chinese air carriers’ stocks, including Air China Ltd., fell as the strongest typhoon in more than seven decades hit Shanghai and forced widespread flight cancellations at the start of the days-long national festival.
--With assistance from Kelly Li.
(Updates with closing prices and other details.)
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