China stocks rebound on ETF buying, CSI300 logs record weekly losing streak
SHANGHAI, Oct 23 (Reuters) - China stocks reversed earlier losses to end higher on Friday, with gains aided by a surge in trading of exchange-traded funds favoured by state-backed investors, though blue-chip shares still notched a record-long weekly losing streak.
At the close, the benchmark Shanghai composite index .SSEC rose 0.9%, while the blue-chip CSI300 index .CSI300 bounced 1.7% after losing as much as 1.9% earlier in the session.
However, the CSI300 index shed 1.6% for the week to record its 11th consecutive weekly drop, the longest losing streak on record since the index was created in 2005.
Following the rebound on Friday, the CSI300 was still down roughly 19% from its June 22 closing peak, nearing the 20% threshold widely used to confirm a technical bear market.
The smaller Shenzhen index .SZSC rose 2.5%, the startup board ChiNext Composite index .CNT jumped 4.2% and Shanghai's tech-focused STAR50 index .STAR50 gained 3%.
The sharp turnaround in Friday's session came after a spike in trading volumes in several exchange-traded funds popular with the "National Team" of state-backed investors, fuelling speculation of official support for the market. 159915.SZ, 510300.SS, 510310.SS, 510330.SS, 510050.SS
Separately, Chinese optical networking companies — Zhongji Innolight 300308.SZ, Eoptolink Technology 300502.SZ and TFC Optical Communications 300394.SZ — issued statements on Friday voicing confidence in the sector's long-term outlook, in an apparent effort to reassure investors amid the recent market selloff.
Analysts at Morgan Stanley said they remained cautious on Chinese equities, saying "weak domestic demand and liquidity headwinds persist, while valuations have yet to reach an outright bottom."
Recent weakness in A-shares has been driven by disappointment over Beijing's piecemeal stimulus efforts for a two-speed economy that is booming in exports but sputtering at home, traders and analysts said.
"The slump stems from insufficient fiscal stimulus and disappointing earnings, in our view, as policymakers have opted for incremental measures rather than the substantial packages seen in 2024," analysts at RBC Wealth Management said in a note.
"Without new policy or technology catalysts, volatile trading may persist into early 2027, while state-backed stabilisation measures may be insufficient to sustain a recovery."
Hong Kong's benchmark Hang Seng index .HSI gained 0.7% at the close.