SHANGHAI: China stocks closed lower on Monday, dragged by semiconductor and new energy shares, with analysts saying that Premier Li Keqiang’s comments on cut in reserve requirement ratios alone cannot turn around the economic down cycle. The blue-chip CSI300 index ended 0.2% at 4,892.62, while the Shanghai Composite Index lost 0.5% to 3,589.31 points.
China will “cut reserve requirement ratios in a timely way to step up support for the real economy, especially small and micro firms, to ensure stable and healthy economic operations,” state media on Friday quoted Li as saying. “The RRR cut, if it materializes, will add to credit supply and support Beijing’s efforts to stem the growth slowdown,” said Nomura in a note.
A newspaper run by the State Council, however, warned the market against “simplistic” interpretations of monetary policy moves as easing expectations gathered steam.
The financial daily ruled out the possibility of a flood of stimulus to prop up the economy, saying China would make its policies more targeted to cope with any downward pressure.
“RRR cut alone cannot turn around the economic down cycle,” said Zhiwei Zhang, Chief Economist at Pinpoint Asset Management. “The future of the economic cycle depends on how supportive fiscal policy will be and whether housing policies will be fine-tuned.”
China’s Guangdong province summoned the chairman of China Evergrande Group last week after the developer said there was “no guarantee” it would have enough funds to meet debt repayments.
Chinese authorities said Evergrande’s problem was mainly caused by its own mismanagement and break-neck expansion, and its issue would not affect the industry’s normal operations.
“The confident tone of regulators was aimed to calm markets, but might also deliver the message that Beijing will keep most of its property curbs in place for a longer while,” Nomura said. Real estate developers rose 1.2%, and financials stocks gained 0.8%. Healthcare firms, semiconductors and new energy shares lost more than 1.9% each.