China stocks sagged on Tuesday morning as investors took profit from a 2 per cent jump the day before, but some analysts expect market enthusiasm to continue ahead of an annual meeting by China’s top legislature that starts next week-end.
By the lunch break, both the blue-chip CSI300 index and the Shanghai Composite Index lost 1.3 per cent, to 3,079.10 points and 2,890.29 points, respectively.
Hong Kong stocks tracked mainland markets lower, with the benchmark Hang Seng Index declining 0.5 per cent, and the Hong Kong China Enterprises Index falling 0.9 per cent.
Despite the correction, some analysts say China’s four-week market rebound, which saw main indexes bounce roughly 10 per cent from their late January low, will likely continue, replicating a typical trading pattern ahead of the gathering of China’s National People's Congress (NPC) which starts on March 5.
China’s top leaders had pledged on Monday to keep economic growth within a reasonable range this year, although the statement was general and broad.
“This time, the spotlight will be on policies to further reduce capacity as part of the government’s supply-side reforms,’’ said Yang Hai, strategist at Haiyuan Securities.
“In addition, there’s now less yuan depreciation pressure, which means China can take a more proactive approach to liquidity easing.’’
Yang’s view was echoed by Shanghai Million Tons Asset Management Co, who said the market is in a “window of opportunity for trading’’.
In a note to clients, the hedge fund house said that it would take time for the real economy to respond to a series of consolidation measures targeting sectors including steel, coal and refineries, but the stock market is a harbinger of what is to come.
On Tuesday, all main sectors lost ground, but resource shares, which have recently rebounded sharply on a global pick-up in commodity prices, were only down slightly, outperforming the broader market.
In Hong Kong, resource and energy shares were the only sector that rose.
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