By Sherry Qin


Chinese shares extended declines on Monday despite a series stimulus measures and the securities regulator's latest pledge to shore up the market. The U.S. Federal Reserve's careful stance on rate cuts, China's persistent property woes and overall tepid investor sentiment all cloud the Chinese equity market.

The Shanghai Composite Index was 0.8% lower at 2707.56 recently, after touching a low of 2635.09. The Shenzhen Composite Index fell as much as 6.7% before paring losses to trade 3.0% lower at 1447.17.

The stronger-than-expected U.S. jobs report for January "pushed down expectations of the first Fed rate cut in March to May," which triggered a resurgence of dollar strength and dragged down Asian indexes, Oanda senior market analyst Kelvin Wong said.

A slightly weaker Caixin services purchasing managers index, a private gauge of China's services activity, also contributed to the weakness in Chinese shares in the session, Wong said.

Property shares were among the top losers in the mainland. China Vanke declined 1.6% and Greenland Holdings was 3.9% lower.

Chinese developers' January contracted sales data were quite weak, said Shujin Chen, head of China financial and property research at Jefferies. Meanwhile, home prices will likely decline faster this year than previous years, Chen said.

After China Evergrande's liquidation order last week, buyers may become more selective and stick to state-owned names with reputable brands and guaranteed project delivery, said Jeff Zhang, equity analyst at Morningstar. "Therefore, it remains difficult for debt-laden builders to turn around their muted growth."

The declines came despite regulators' latest vow to stabilize the market after Shanghai's benchmark index suffered its worst week since 2018.

The China Securities Regulatory Commission said Sunday that it will prevent abnormal market fluctuations, guide more medium- and long-term funds into the market and crack down on illegal trading, according to a statement. The regulators didn't specify what measures they will implement.

China should set up a stock-stabilization fund "as soon as possible" to boost investor confidence, Liu Yuhui of the Chinese Academy of Social Sciences, a state research institute, told state media 21st Century Business Herald in a recent interview. The size of the stabilization fund should be 2 trillion yuan to CNY3 trillion in the short term, with a goal of ramping up to CNY10 trillion ($1.4 trillion) in the long term, Liu said.

While there has been chatter about a stabilization fund, China hasn't announced any concrete plans besides some piecemeal support for the economy and markets.

"The latest stimulus measures didn't bring fundamental changes to China's economy, especially the worsening property sector," said Sonija Li, head of retail research at Maybank.

Chinese investors are lacking confidence as they try to reduce their positions before the Lunar New Year, Li said.


Write to Sherry Qin at sherry.qin@wsj.com


(END) Dow Jones Newswires

02-05-24 0055ET