Chinese Stocks Tumble as Stimulus Skepticism Keeps Bulls at Bay

(Bloomberg) -- Chinese stocks listed onshore suffered their biggest drop in more than four years as traders grew impatient over the pace of Beijing’s stimulus measures and weak holiday-spending data hurt sentiment.

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The CSI 300 Index plunged 7.1%, erasing its advance from Tuesday, when mainland markets reopened after the Golden Week holidays. While the gauge pared declines after the Ministry of Finance said it would hold a briefing on fiscal policy, selling pressure resumed to hand the measure its first loss in 11 days. An index of Chinese stocks listed in Hong Kong fell further after sliding more than 10% Tuesday.

While equities rallied in recent weeks after a series of policy announcements designed to support the economy, enthusiasm over a stimulus-driven equity surge is cooling due to the lack of any further major initiatives at a key policy meeting Tuesday. A growing number of strategists and fund managers say Beijing needs to back up its spending pledges with real money, while others caution that the rally had gone too far too fast after benchmark indexes surged more than 30% in a matter of days.

“The market is tussling between expectation for more stimulus and economic realities,” said Yi Wang, head of quantitative investment at CSOP Asset Management Ltd. “Investors want to see a quick translation from stimulus measures into improving corporate earnings, better macro data — whether that’s with inflation, employment or local government debt. But there is a time gap between that expectation and the economic reality.”

At a briefing that will start at 10 a.m. local time on Saturday, Finance Minister Lan Fo’an will introduce moves to strengthen fiscal policy to shore up growth, and answer questions from reporters, the State Council Information Office said in a statement Wednesday.

Stock investors have looked for greater fiscal spending to arrest a slowdown that threatens to put the country’s 2024 target of about 5% growth out of reach. Banks including Morgan Stanley and HSBC Holdings Plc expect 2 trillion yuan ($283 billion) in stimulus, while Citigroup Inc. put the amount at 3 trillion yuan.

‘Degree of Discomfort’

Wednesday’s slide in the CSI 300 was its biggest one-day decline since February 2020. The Hang Seng China Enterprises Index, which tracks Chinese stocks listed in Hong Kong, was down 1.5%. The gauge has erased all the gains made during the period onshore markets were shut.