China shares slide as pessimistic expectations boost

The CSI300 has lost 7.4 percent this month, and the Shanghai index is down 8 percent.

China's main stock indexes resumed a downward spiral Tuesday, a day after the blue-chip index posted its biggest gains in nearly three years, as investors remained pessimistic about economic prospects and risks posed by shares pledged for loans.

At the close, the CSI300 index was down 2.66 per cent. The Shanghai Composite index lost 2.26 per cent.

The CSI300 has lost 7.4 per cent this month, and the Shanghai index is down 8 per cent.

"There has already been a turnaround in policy and liquidity elements, but the situation of slowing economic growth has not improved, and the Sino-U.S. trade conflict, in particular, has boosted pessimistic expectations," Guosheng Securities analysts said in a note.

Coordinated messages of support from senior Chinese officials over the weekend aimed at quelling investor concerns over risks posed by 4.3 trillion yuan ($619.58 billion) worth of shares pledged for loans helped China's markets to rally on Monday, driving the CSI300 to its strongest day since November 2015.

But on Tuesday, despite more official pledges of support for private firms, enthusiasm had disappeared among both onshore and offshore investors.

"There was a big turnaround last Friday when the authorities came out to save the market. But ultimately, foreign investors don't buy this story," said Steven Leung, Sales Director at UOB Kay Hian.

The day's losses dragged down sectors across the board. The financial sector sub-index ended 2.19 per cent lower, the consumer staples sector fell 5.98 per cent, the real estate index lost 2.36 per cent and the healthcare sub-index gave up 2.71 per cent.

Trading activity was relatively heavy, with 17.83 billion shares changing hands on the Shanghai exchange, roughly 142.8 per cent of the market's 30-day moving average of 12.49 billion shares a day.

The securities sector sub-index, which was up 1.3 per cent at the midday break on hopes that market support from regulators would benefit brokerages, also ended the day lower, falling 0.19 per cent. It had risen by the 10 per cent daily limit on Monday.

The yuan steadied on Tuesday after hitting a more than 21-month low in the previous late night session. At 07:21 GMT, the yuan was trading at 6.9391 per U.S. dollar, 0.08 per cent firmer than its close of 6.9444, the weakest such close since Jan. 3, 2017.

Chinese government bond futures rose as the stock market fell. Chinese 10-year Treasury futures for December delivery, the most traded contract, were up 0.22 per cent at 95.330.

($1 = 6.9402 Chinese yuan)