China stocks flat, limp to quarterly drop, as stimulus falls short

Chinese blue chips were stuck ​near one-year lows on Wednesday as Beijing's latest piecemeal package ​of policy support disappointed downbeat investors, leaving the benchmark ‌to ​log its sharpest quarterly drop in more than four years. A two-speed economy with strong factory output and exports but weak domestic demand has been a deadweight on sentiment, while a pullback in high-flying tech shares has ‌slammed the brakes on what had been the brightest spot in the market.

China's CSI 300 index rose 0.3% at market close, struggling to lift off a one-year low made earlier in the week. The gauge has registered a 12.5% slump this quarter, the largest since the height of COVID-19 lockdowns in 2022. The Shanghai ‌Composite index closed up 0.3% and posted a 6.1% quarterly fall, also the biggest in four years.

Beijing unveiled a series of credit and ‌mortgage support steps on Tuesday, which market participants said could get growth running towards the bottom of national targets but would not do much to lift confidence or shift investors' mood. The latest measures are the broadest and most powerful in two years, but paled against the broad easing announced in September 2024 that included rate cuts and measures to prop up the ⁠stock market, ​said Duncan Wrigley, chief China economist ⁠at Pantheon Macroeconomics.

"It won't solve China's structural imbalances, with sluggish domestic demand and high reliance on exports," Wrigley wrote in a note. China's CSI 300 Real Estate Index plunged as much as 9% ⁠before reversing losses.

MORTGAGE SUBSIDIES The People's Bank of China has lowered its one-year pledged supplementary lending (PSL) rate by 25 basis points to 1.5% to support infrastructure investment.

Authorities also raised ​re-lending quotas for tech firms and small businesses, and, battling a long housing downturn, introduced mortgage subsidies for eligible first-time buyers. "The policy is ⁠in the right direction. But the government has refrained from strong stimulus, unveiling measures that are not adequate," said Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management.

"The economy is very weak, ⁠and ​a recovery in property and consumption is not in sight." Market sentiment was also cautious ahead of the week-long National Day holiday starting on Thursday. Liquidity has thinned significantly, with combined turnover on China's Shanghai and Shenzhen stock exchanges dropping to 1.41 trillion yuan on Tuesday, its lowest level since July ⁠2025.

"No big stimulus is in sight," said Wen Xunneng, CEO of Zhu Liu Asset Management. Tech shares also reacted weakly, with the CSI Semiconductor Index down ⁠nearly 3% and falling 33% since ⁠June. The CSI AI Index declined 1.6% and posted a 26% quarterly fall.

In Hong Kong, Chinese H-share index Hang Seng China Enterprises Index inched up 0.5%, and the city's benchmark Hang Seng Index was 0.4% higher.