Shanghai Composite index closes 1.49% lower, investors look-up to authorities to support economy

The blue-chip CSI300 index ended down 1.4 per cent, with its financial sector sub-index closed lower by 1.37 per cent.

China's stock markets showed no signs of recovery on Monday after a week of declines as investors await more concrete moves by authorities to support the economy.

The Shanghai Composite index closed 1.49 per cent lower at 2,568.10. The blue-chip CSI300 index ended down 1.4 per cent, with its financial sector sub-index closed lower by 1.37 per cent. The smaller Shenzhen index slipped 1.18 per cent and the start-up board ChiNext Composite index lost 1.43 per cent.

The drop followed a week of declines that sent the Shanghai Composite to levels not seen since 2014.

While last week's sell-off was inspired by woes on Wall Street, its continuation in A-shares this week shows that Chinese investors have little confidence in their government's willingness to support the market, said a Beijing-based trader.

"The message from the central bank has been very positive," he said. "However, markets are hoping for action, not words, to support enterprises." The People's Bank of China's 100-basis point cut to banks' reserve requirement ratio (RRR), announced by the central bank on Oct 7, took effect on Monday, easing pressure on the yuan. But that has done little to restore confidence in equities, said this trader.

"Banks have looser liquidity, but the money is not finding its way to the real economy. The impact on stocks is very small."

Around the region, MSCI's Asia ex-Japan stock index lost 1.02 per cent, while Japan's Nikkei index slipped 1.87 per cent. The yuan was quoted at 6.9283 per U.S. dollar, 0.2 per cent weaker than the previous close of 6.9146. The largest percentage gainers in the main Shanghai Composite index were Yunnan Metropolitan Real Estate Development Co Ltd, which ended up 10.16 per cent, followed by YanTai Yuancheng Gold Co Ltd, which closed 10.09 per cent firmer and Antong Holdings Co Ltd, which ended 10.08 per cent higher. 

The largest percentage losses in the Shanghai index were Pengqi Technology Development Co Ltd, which ended down 10.07 per cent, followed by Zhejiang XinAn Chemical Industrial Group Co Ltd, which closed 10.03 per cent lower and Kaile Science and Technology Co Ltd Hubei, which ended 10.02 per cent weaker. 

So far this year, the Shanghai stock index is down 21.17 per cent. Shanghai stocks have declined 7.6 per cent this month. About 11.86 billion shares traded so far on the Shanghai exchange, roughly 99.8 per cent of the market's 30-day moving average of 11.88 billion shares a day. The volume traded was 17.01 billion shares, as of last trading day.

(With inputs from agencies.)