Shanghai stocks led the way into the red amid the growing fallout from President Donald Trump's move to block China's Huawei Technologies from buying vital American technology.
HONG KONG: China shares eased on Monday amid economic and trade uncertainties, but losses were curbed by hopes for further policy support and ahead of the U.S. Federal Reserve meeting.
At the midday break, the Shanghai Composite index was down almost 0.1% at 2,880.52 points, while the blue-chip CSI300 index dipped 0.2%.
CSI300's financial sector sub-index was higher by 0.2%, the consumer staples sector lost 1.4%, the real estate index was down 0.4% and healthcare shares edged up 0.2%.
The smaller Shenzhen index was down 0.5% and the start-up board ChiNext Composite index was weaker by 1%. The A-share market had its first chance to respond to May's industrial output and investment data, released after the market closed on Friday.
China's industrial output growth unexpectedly slowing to a more than 17-year low and investment cooled. Hours after the data's release, the country's central bank said it will increase the re-discount quota by 200 billion yuan ($28.88 billion) and the standing lending facility quota by 100 billion yuan, marking its latest step to boost liquidity in the banking system.
Trade uncertainty and inflation worries are among factors weighing on the stock market, Greater Wall Securities' analysts wrote in a note on Monday. "The market should continue to be volatile, with more room for downward movement in the short run," the analysts said.
The U.S. Federal Reserve is meeting on June 18 and 19, with a press conference scheduled for a second day. Markets are almost pricing in a 25 basis point cut for July.
Great Wall Securities' analysts also noted that more dovish policies by central banks worldwide could afford the PBOC more room to ease. The Chinese central bank said on Monday the second phase of a cut in the reserve requirement ratio freed about 100 billion yuan ($14.44 billion) worth of long-term funds. In open market operations, it injected 150 billion yuan via 14-day reverse repos.
The market will continue to look for more stimulus from authorities, who may rely more on fiscal policy to provide support, said Tai Hui, chief market strategist for Asia at JP Morgan Asset Management. "The government is still very mindful … Don't expect massive liquidity that could raise corporate debt level or create speculative activity in the markets."
On trade, U.S. President Donald Trump said on Friday "it doesn't matter" if Chinese leader Xi Jinping attends the G20 summit later this month, predicting a trade deal with Beijing would occur at some point anyway.
In Hong Kong, the Hang Seng started the session up more than 1%, and finished the morning trade 0.7% firmer, with H-shares higher by 0.3%.
Around the region, MSCI's Asia ex-Japan stock index was flat, while Japan's Nikkei index was up 0.1%.
Masses of protesters in the city took to the street for a second Sunday against the controversial extradition bill. Hong Kong's leader Carrie Lam has apologised and suspended the push for the law.
"The extradition law created some social tension last week, that's now been eased with (the bill's) suspension," said Ben Kwong, head of research at KGI Asia. "The market's focus now turns back to economic issues, such as central bank meetings this week." - Reuters
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