China stocks fall on COVID worries, set to hit 23-month low

The Hong Kong China Enterprises Index lost 2.7% to 6,781.49. ** Reuters reported that some Chinese state banks would cut deposit rate ceilings on Monday, a week after regulators encouraged smaller banks to do so, but the news failed to lift sentiment.

China stocks fell on Monday, with the CSI300 index set to hit a 23-month low and the Shanghai composite index hovering just above the key 3,000-point level, as China's zero-COVID policy and monetary-easing restraint dents investor sentiment. The CSI300 index fell 2.2% to 3,925.30 points at the end of the morning session, while the Shanghai Composite Index lost 2.4% to 3,012.18 points.

Both indexes have erased all gains made since Vice Premier Liu He's pledge on March 16 to support the economy and financial markets. The Hang Seng index dropped 2.6% to 20,103.67 points. The Hong Kong China Enterprises Index lost 2.7% to 6,781.49.

** Reuters reported that some Chinese state banks would cut deposit rate ceilings on Monday, a week after regulators encouraged smaller banks to do so, but the news failed to lift sentiment. ** The People's Bank of China (PBOC) said it would step up support to the economy and maintain market stability, with a PBOC official saying China should take steps to soften the economic impact of COVID-19 and boost annual economic growth to above 5%.

** Analysts and traders said the key issue was whether China would loosen its zero-COVID policy which is worsening its growth outlook, while a less-than-expected reserve ratio cut and rate reductions also added to their disappointment. ** Most sectors fell, with resource stocks slumping 4.7% to lead the decline, while semiconductors and new energy shares both dropped about 3.8%.

** Banks fell 2.8% as lower deposit rates are expected to hurt their margins, led by a 6.4% decline in China Merchants Bank as its ex-president, Tian Huiyu, is "suspected of serious violations of disciplines and laws" and is being investigated. ** As Shanghai still grapples with the COVID-19 outbreak amid prolonged strict lockdowns, Beijing kicked off three rounds of COVID-19 testing for all residents of its biggest district, Chaoyang, on Monday after dozens of cases were reported.

** In Hong Kong, tech giants and mainland developers shed nearly 3% each.