Chinese stocks mired at one-year low as policy measures disappoint

China's latest effort to steady its sliding stock market struggled for traction on Tuesday, with shares pinned near one-year lows and investors saying a familiar playbook of encouraging money into the market was falling short this time.

China has the weakest-performing major stock market globally this year, with the ‌blue-chip CSI300 down 13% since January. The index notched its largest monthly fall for a decade in October, led by a slump in AI stocks, and closed 0.2% lower on Tuesday. The performance is a setback for efforts to turn Chinese stocks into a reliable investment and funding source for the AI boom. On Monday regulators responded with measures aimed at funding stock purchases by brokers, funds and companies.

Authorities have also instructed ‌banks to hold off on new listings or large share sales in order to support the market, the Financial Times newspaper reported on Tuesday, citing people with knowledge of the matter. The market ‌regulator, the China Securities Regulatory Commission, did not immediately respond to a Reuters request for comment on the report.

Fund manager Chen Jiande said steps — including central bank swap operations to fund stock purchases and encouraging buybacks — repeated efforts in 2024 and offered a chance to sell, rather than buy. "These measures were below expectations," said Chen, general manager at Fujian Tianlang Asset Management Co.

"Many investors in battered tech shares are taking advantage of any rebound to rush out." 'ABSENCE OF FAITH'

The benchmark Shanghai Composite Index ⁠dropped 0.8% on ​Tuesday and sits, like the blue-chip index, near ⁠its lowest level in a year. The tech-focused STAR Chip Index tumbled as much as 7% to its lowest since December 2025, while the AI index dropped more than 4%. Wang Yapei, fund manager at Zijie Private Fund, said one issue is that ⁠the government is prodding market participants to shell out the money, rather than providing the funding.

Under the announced schemes, market participants obtain liquidity from the central bank via swaps or re-lending to buy shares. "Major shareholders may not have ​a strong incentive to buy sliding shares with borrowed money, as they need to take the risks themselves," Wang said.

"The problem now is that there's an absence of faith in ⁠the market. Once faith is gone, you need continuous buying with cash to prop up prices." ECHOES OF 2024

In September 2024, China launched a similar package — only with economic stimulus via rate and reserve-ratio cuts — that kicked off a two-year bull run in the ⁠market. ​But this time, regulators have merely fine-tuned the facilities, analysts said. To be sure, more may be in the offing and a move by the People's Bank of China to stall a rising yuan on Monday ought to help exports, the one bright spot in China's economy.

The PBOC hiked foreign exchange reserve requirements, which should drive dollar buying, and sent the yuan on its steepest one-day fall for ⁠five months in a brake on a rally that has lifted China's currency nearly 10% since the start of 2025. "We believe policy support on the scale of the September 24, 2024, measures ⁠may no longer be far off, as both ⁠real and nominal growth come under pressure," said Yu Xiangrong, chief China economist at Citi.

UBS economists led by Yu Song agreed that support could build, saying the latest steps marked a new phase of coordinated action across the three main regulators — a sign of commitment to stabilising markets. But they played down ‌the prospect of a full-scale repeat, arguing ‌economic growth remained within policymakers' comfort zone and the recent selloff did not reflect any fresh deterioration ​in fundamentals.