HONG KONG: China and Hong Kong stocks extended declines on the last trading day of January, with onshore blue chip stocks registering a rare sixth straight losing month as economic data and stimulus measures disappoint.

The blue-chip CSI 300 Index dipped 0.9% and the Shanghai Composite Index dropped 1.5% on Wednesday.

Hong Kong’s Hang Seng Index dropped 1.4% and the Hang Seng China Enterprises Index fell 1.5%.

Traders in broader Asian markets also stayed on guard ahead of the US Federal Reserve’s rate decision later in the day, with expectations that the central bank will keep rates on hold.

China’s manufacturing activity contracted for a fourth straight month in January, an official factory survey showed on Wednesday.

The official purchasing managers’ index (PMI) rose to 49.2 in January from 49.0 in December, below the 50-mark separating growth from contraction and was in line with a median forecast of 49.2 in a Reuters poll.

The latest PMIs point to “a lackluster picture of a continued manufacturing contraction, roughly flat services and slowing construction”, Nomura analysts wrote in a note.

Weak recovery and limited stimulus have weighed on investor sentiment.

Hang Seng recorded its worst January performance since 2016, down 9.2%, with tech and property sectors leading the decline.

Hang Seng Tech Index tumbled 20% while Hong Kong-listed mainland property stocks plunged 19% in January.

CSI 300 fell 6.3% for the month.

China’s state-owned banks were heavy sellers of dollars on Wednesday to defend yuan as stock markets slide, sources told Reuters.

More Chinese cities, including Suzhou and Shanghai, have relaxed home purchase restrictions this week in a bid to revive demand, yet property stocks remained weak as the policies are seen as piecemeal.

China shows a more proactive stance to shore up growth, HSBC analysts said in a note.

“Nonetheless, consistency and persistence of policy support will still be needed to help achieve a growth target of ‘around 5%’, they said.

Meanwhile, yields on the benchmark 10-year government bond, fell nearly 2 basis points to 2.4275%, the lowest since June 18, 2002, indicating the persistent investor expectations for imminent monetary easing.