(Bloomberg) — Chinese stocks saw modest gains as onshore traders returned from the Lunar New Year holidays, with broader caution toward the market offsetting buoyant travel and spending data.
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The benchmark CSI 300 Index opened 0.8% higher on Monday, but soon trimmed a bulk of its advance. The moves trail gains seen offshore when mainland China was shut Feb. 9-16. A gauge of stocks in Hong Kong had rallied nearly 5% in three sessions since it reopened on Wednesday while the Nasdaq Golden Dragon China Index jumped 4.3% last week.
Monday’s early trading shows that doubts run deep over the China market’s longer-term prospects as the economy struggles with deflation and a property crisis. Investors were hoping for some catch-up strength at the reopen after state media reported that about 474 million domestic tourist trips were made during the eight-day holiday, up 19% from the same period in 2019 before the pandemic.
“Onshore markets may be reopening with some positive momentum after holiday spending data was better than expected, but given the strong rebound entering the holidays it will take more measures to be sustained,” said Marvin Chen, strategist at Bloomberg Intelligence.
Onshore stocks had rallied ahead of the holidays as authorities sought to revive investor confidence, with state funds ratcheting up purchases, a slew of regulatory tweaks to reduce selling pressure and a surprise replacement of the securities regulator chief. The benchmark CSI 300 Index rebounded from a five-year low and climbed 5.8% in the week before the holidays.
“In terms of tourist consumption numbers, most of the beat comes from the traffic numbers and if you look at average spending, austerity still exists,” said Willer Chen, an analyst at Forsyth Barr Asia Ltd.
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Traders want to see further policy support across the monetary and fiscal space, in addition to a cut in the reserve requirement ratio already undertaken. China refrained from lowering a key policy interest rate on Sunday as its central bank sought to shield the yuan from volatility, underscoring the challenges policymakers face as they try to manage economic risks and pressures from deflation.
Tech stocks on the CSI 300 Index stood out on Monday. Cambricon Technologies Corp. and Zhongji Innolight Co. jumped more than 8% as Chinese names related to artificial intelligence responded to OpenAI’s unveiling of its new system, called Sora, that can create realistic-looking videos. Healthcare shares fell the most. In Hong Kong, the Hang Seng China Enterprises Index slid more than 1%.
The CSI 300 gauge has lost more than 40% of its value since a 2021 peak, hammered by China’s stringent Covid controls, regulatory crackdowns, an uneven economic recovery as well as geopolitical tensions. Global funds have been opting out of Chinese stocks and seeking alternatives in other markets such as India and Japan.
The latest Bank of America Corp. survey of money managers showed that going short Chinese stocks, which has been the second-most crowded trade for months, is becoming more popular. A third of the respondents said they will increase their allocation if they see more aggressive fiscal policy to boost the real estate sector.
Any stimulus signs emerging ahead of the key annual meetings in March, where the leadership announces the economic growth target and development goals, will thus be closely watched.
“It’s worth noting that this year’s Lunar New Year holiday spanned eight days, compared to the seven days in 2019,” said Redmond Wong, market strategist at Saxo Capital Markets. “Additionally, the average tourism spending per trip declined from the levels in 2019 as well.”
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