Key Takeaways
- Chinese blue chips remain near one-year lows amid weak policy support.
- Quarterly drop in Chinese stocks is expected to be the largest in over four years.
- Market sentiment cautious ahead of National Day holiday.
Chinese blue chips were pinned near one-year lows on Wednesday, reflecting investor disappointment with Beijing’s latest policy support measures. The CSI 300 index, a key benchmark, rose only 0.2% in morning trade, struggling to lift off a one-year low reached earlier in the week.
The Shanghai Composite index, another major index, was up 0.3% by lunchtime, but is set for a 6.2% quarterly fall, the biggest since the height of the COVID-19 lockdowns in 2022. This decline is part of a broader trend, with the CSI 300 Real Estate Index plunging as much as 9% before reversing losses.
Beijing unveiled a series of credit and mortgage support steps on Tuesday, including a reduction in the one-year pledged supplementary lending (PSL) rate by 25 basis points to 1.5%. Authorities also raised relending quotas for tech firms and small businesses, and introduced mortgage subsidies for eligible first-time buyers. However, these measures are seen as insufficient by market participants.
Duncan Wrigley, chief China economist at Pantheon Macroeconomics, noted that the latest measures are the broadest and most powerful in two years but fall short of the broad easing announced in September 2024, which included rate cuts and measures to prop up the stock market. Wrigley stated, 'It won’t solve China’s structural imbalances, with sluggish domestic demand and high reliance on exports.'
Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management, echoed the sentiment, saying, 'The policy is in the right direction. But the government has refrained from strong stimulus, unveiling measures that are not adequate.'
Market sentiment was also cautious ahead of the week-long National Day holiday starting on Thursday. Liquidity has thinned significantly, with combined turnover on China’s Shanghai and Shenzhen stock exchanges dropping to 1.41 trillion yuan on Tuesday, its lowest level since July 2025.
Tech shares also reacted weakly, with the CSI Semiconductor Index down more than 2% and on track for a 32% fall since June. The CSI AI Index declined 1.2% and is set for a 25% quarterly fall. In Hong Kong, the Chinese H-share index Hang Seng China Enterprises Index inched up 0.1%, and the city’s benchmark Hang Seng Index was little changed.
Wen Xunneng, CEO of Zhu Liu Asset Management, commented, 'No big stimulus is in sight.' This sentiment reflects the cautious mood among investors, who are awaiting further policy announcements and signs of economic recovery.
It won’t solve China’s structural imbalances, with sluggish domestic demand and high reliance on exports.
Duncan Wrigley, Chief China Economist at Pantheon Macroeconomics
The policy is in the right direction. But the government has refrained from strong stimulus, unveiling measures that are not adequate.
Charles Wang, Chairman of Shenzhen Dragon Pacific Capital Management
No big stimulus is in sight.
Wen Xunneng, CEO of Zhu Liu Asset Management
