With six major brokerages cutting China’s economic growth forecast for the year, the country’s stocks fell to around nine-month lows on Monday as investors were disappointed by milder-than-expected measures by authorities to boost confidence in the economy, with sluggish recovery and property woes keeping sentiment fragile.
China’s blue-chip CSI 300 Index was down 1.4 per cent at the close, while the Shanghai Composite Index lost 1.2pc.
Hong Kong’s Hang Seng Index fell 1.8pc, and the Hang Seng China Enterprises Index declined 1.9pc.
Both the CSI and Hang Seng benchmarks dropped to their lowest levels since late November 2022, erasing all gains accumulated after China’s reopening from COVID curbs.
China cut its one-year benchmark lending rate on Monday, but surprised markets by keeping the five-year rate unchanged, falling short of market expectations of cuts to both rates.
On Friday, China’s securities regulator unveiled a package of measures aimed at reviving a sinking stock market, including cutting trading costs, supporting share buybacks and encouraging long-term investment.
Read more: China’s State Council issues measures to expand consumption
“The government’s policy support has arguably been less than what was indicated earlier in the year,” said UBS economists led by Tao Wang.
UBS downgraded China’s GDP growth forecast to 4.8pc for 2023 from 5.2pc earlier.
Most sectors fell in mainland markets, with shares of property developers, tourism-related firms, new energy and securities brokers down between 2pc and 3.5pc each to lead the decline.
Foreign investors sold Chinese shares via the Stock Connect for the eleventh session in a row, selling a net 6.4 billion yuan ($875.2 million) on Monday.
In Hong Kong, tech giants and property developers both lost roughly 2pc.
Goldman Sachs expects Chinese stocks will settle in a lower trading range than previously expected, until more forceful policy responses are made available to backstop the contagion risk from the ailing housing market.
The bank’s analysts cut the full-year earnings per share growth estimate for MSCI China to 11pc from 14pc.
Six major brokerages cut China’s economic growth forecast for the year as worries about contagion from debt repayment troubles at its top private property developer Country Garden deepened.
China’s economic growth outlook has soured further with retail sales, industrial output and investment growing at a slower-than-expected pace.
Weak consumer demand has tipped the world’s second-largest economy into deflation amid rising pressure on Beijing to deliver more stimulus to support the economy.
Following are the revised forecasts from some global banks:
Morgan Stanley 4.7pc from 5pc, JPMorgan 4.8pc from 5pc, Barclays 4.5pc from 4.9pc, Deutsche Bank 5pc from 5.3pc, Research Nomura 4.6pc from 5.1pc, UBS 4.8pc from 5.2pc.
