Global Market: Chinese stocks struggle near one-year lows as policy support disappoints

Synopsis

Chinese blue-chip stocks stayed near one-year lows despite Beijing’s latest credit, mortgage and investment support measures. The CSI 300 was headed for its steepest quarterly decline since 2022, while property and technology shares remained under pressure. Weak domestic demand, subdued trading ahead of the holiday and limited investor confidence continued to weigh on markets.

Chinese blue-chip stocks remained near one-year lows on Wednesday as Beijing's latest measures to support credit, mortgages and investment failed to revive investor confidence, putting the benchmark indexes on track for their sharpest quarterly declines in more than four years, according to a report by Reuters.

The CSI 300 index rose 0.2% in morning trading but remained close to a one-year low reached earlier this week. The index is on course to fall about 13% this quarter, which would be its biggest quarterly decline since the COVID-19 lockdowns in 2022, as per the report.

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The Shanghai Composite gained 0.3% by the lunch break and was heading for a quarterly decline of about 6.2%, also its steepest fall in four years.

Policy Measures Fail to Lift Sentiment

Beijing announced a series of credit and mortgage support measures on Tuesday, including steps aimed at boosting infrastructure investment, supporting technology companies and small businesses, and helping eligible first-time homebuyers.

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The People's Bank of China cut its one-year pledged supplementary lending rate by 25 basis points to 1.5%, while authorities also increased relending quotas for technology companies and small businesses. Mortgage subsidies were introduced for eligible first-time buyers as policymakers sought to counter a prolonged housing downturn.

Reuters reported that market participants viewed the measures as capable of helping economic growth move toward the lower end of Beijing's national targets, but insufficient to significantly improve confidence or change investor sentiment.

Economy Faces Weak Domestic Demand

Investor concerns have been compounded by the uneven nature of China's recovery. Strong factory output and exports have contrasted with subdued domestic demand, while weakness in the property sector continues to weigh on the broader economy.

The report stated that economists viewed the latest package as the broadest and most powerful set of measures in two years, but noted that it was less forceful than the sweeping stimulus announced in September 2024, which included interest-rate cuts and measures designed to support the stock market.

The latest measures also did not include fresh direct support for equities, limiting their immediate impact on market sentiment.

Property Stocks Under Pressure

China's property sector remained particularly volatile. The CSI 300 Real Estate Index plunged as much as 9% before recovering most of its losses.

The housing market has remained a major drag on China's economy, with weak property demand and subdued household confidence limiting the strength of any broader recovery. Investors continued to question whether the latest mortgage support measures would be sufficient to generate a meaningful turnaround in housing and consumption.

Tech Stocks Lose Momentum

Technology stocks, previously among the strongest performers in the Chinese market, also came under pressure.

The CSI Semiconductor Index fell more than 2% and was on course for a decline of about 32% since June. The CSI AI Index dropped 1.2% and was heading for a quarterly loss of roughly 25%.

The retreat in technology shares has removed an important source of support for Chinese equities, adding to broader concerns about the sustainability of the market's earlier rally.

Holiday Caution Weighs on Trading

Trading activity was subdued ahead of China's week-long National Day holiday, which begins on Thursday.

The report by Reuters stated that the combined turnover on the Shanghai and Shenzhen stock exchanges fell to 1.41 trillion yuan on Tuesday, the lowest level since July 2025, highlighting the cautious stance among investors.

In Hong Kong, the Hang Seng China Enterprises Index edged up 0.1%, while the benchmark Hang Seng Index was little changed.

With domestic demand still weak, property markets under pressure and technology stocks retreating, investors remain focused on whether Beijing will introduce stronger measures to provide a more durable boost to growth and market confidence.

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(You can now subscribe to our ETMarkets WhatsApp channel)

(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.

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