China stocks fall over deepening property crisis

SHANGHAI: China stocks fell on Tuesday, tracking regional markets lower, as worries over the country’s deepening property crisis and soft domestic demand offset signs of improvement in factory output.

Caution ahead of a flurry of global central bank meetings this week also kept trading subdued, with the US Federal Reserve reviewing policy midweek amid further signs it may not cut interest rates as quickly or as much as expected just a few months ago, which would keep pressure on China’s yuan.

China’s Shanghai Composite Index and the blue-chip CSI300 Index both lost 0.7% at market close.

Hong Kong’s benchmark Hang Seng and the Hang Seng China Enterprises Index fell 1.2% each.

The broad Asian stock market fell amid the cautious mood. Japanese shares were volatile after the Bank of Japan in a widely expected move ended eight years of negative interest rates and ushered in the nation’s first policy tightening since 2007. Other Asian stocks fell.

Data on Monday showed China’s factory output and retail sales beat expectations in the January-February period, but weakness in the property sector remains a heavy drag on the economy and confidence.

“China’s organic economic growth is likely to be flat to mildly positive in the coming months,” analysts at Gavekal Dragonomics said. “But the latest data will not persuade market participants that policymakers have decisively shifted towards growth.”

Moreover, a Reuters survey showed China is widely expected to leave benchmark lending rates unchanged on Wednesday, as the central bank kept a key policy rate steady last week.

Shares in healthcare and securities brokers lost 1.8% each to lead the decline, while consumer staples and energy added 1.3% and 0.5%, respectively.

Real estate developers fell 1.3% even after the Chinese megacity Beijing said it would optimise property regulation and implement different policies based on each districts’ situation.

Foreign investors sold a net 7 billion yuan ($972 million) of Chinese shares via the Stock Connect scheme on the day, after seven sessions of inflows. Tech giants listed in Hong Kong slumped 1.8%.