China stocks rebound on ETF buying, but CSI300 logs record 11-week losing streak

what happened

Chinese stocks reversed early losses on Friday and closed higher, helped by a surge in trading of exchange-traded funds favoured by state-backed investors, which fuelled speculation of official support. The Shanghai Composite rose 0.9%, while the blue-chip CSI300 bounced 1.7% after dropping as much as 1.9% during the session, Reuters reported.

For the week, the CSI300 still fell 1.6%, its 11th straight weekly decline and the longest such run since the index was created in 2005. The Shenzhen index gained 2.5%, the ChiNext jumped 4.2% and the STAR50 rose 3%, while Hong Kong's Hang Seng added 0.7%. After the rebound, the CSI300 remained roughly 19% below its June 22 closing peak, close to the 20% level usually used to define a bear market.

Morgan Stanley analysts said they stayed cautious on Chinese equities and that valuations had yet to bottom. RBC Wealth Management analysts blamed insufficient fiscal stimulus and disappointing earnings for the slump.

why it matters

Investors have been disappointed by Beijing's incremental steps, which contrast with the larger packages of 2024, while exports boom and domestic demand stays weak. Without new policy or technology catalysts, RBC expects volatile trading may persist into early 2027.

market impact

China equities: weak domestic demand and stimulus doubts weigh on CSI300 and Hong Kong sentiment

tags

instruments