Chinese Stock Gains Fizzle as Focus Shifts to US Trade Talks
(Bloomberg) -- For all the excitement at the start of the day, investors in Chinese stocks ended Wednesday's session on a rather disappointing note.
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Markets opened gap up, helped by news that Chinese and US officials are meeting to discuss trade later this week after a monthlong standoff. The central bank bolstered the mood, reducing its policy rate and lowering the amount of cash lenders must keep in reserve.
But it seemed investors used those gains to take some money off the table with no certainty that the trade talks will go smoothly. In the end, the Hang Seng China Enterprises Index closed down 0.2% after rising as much as 2.4% in the morning. The CSI 300 Index, a benchmark for onshore shares, more than halved its advance to 0.6%.
'Investors are probably taking some profits,' said Jason Chan, a senior investment strategist at Bank of East Asia. 'The market is now turning to see the progress in trade talks. Investors may be more cautious that both sides may not be able to make a deal in the near term.'
Onshore Chinese stocks and bonds have been notably stable in recent weeks, relative to turbulent global markets. Volatility in the CSI 300 Index fell to a record low last month. Still, the country's shares have underperformed some of their Asian peers, which have staged a sharp rebound since President Donald Trump's April 2 tariff onslaught, on concern over the impact of the trade war.
The PBOC cut the seven-day reverse repurchase rate to 1.4% from 1.5%, according to Governor Pan Gongsheng. The central bank will also trim the reserve requirement ratio by half a percentage point, Pan said. China Securities Regulatory Commission's chief Wu Qing said the government will consolidate momentum in market recovery by supporting Central Huijin Investment Ltd. and other institutions to act as stabilization funds.
The measures underscore a sense of urgency among Chinese officials as stiff tariffs threaten the country's economic growth goal for the year. Retail and catering sales expanded at a slower pace relative to last year with an increase of 6.3% during the Labor Day break, the Xinhua news agency reported earlier this week. The country's factory activity slipped into the worst contraction since December 2023 in April, revealing early damage from the trade war.
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