Chinese stocks fell back Thursday, a day after their biggest gain in four months, as officials remained silent on speculation over government plans for market-boosting measures.
The benchmark Shanghai Composite Index fell 3.6 percent, or 91.56 points, to 2,431.72. It had gained 7.6 percent Wednesday after a research report by JPMorgan & Chase suggested the government was planning a major economic stimulus package, fanning hopes of official measures that might finally end a long downward correction.
Investors sold to cash in profits from the day before, with the market's biggest listed share, PetroChina, losing 3.7 percent to 13.71 yuan.
Fellow refiner China Petroleum & Chemical Corp. slipped 6.3 percent to 10.15 yuan as crude oil prices rebounded to above US$116 a barrel.
Among other major decliners, newly listed China Southern Locomotive & Rolling Stock fell by the 10 percent maximum daily limit to 3.49 yuan. Shares in the company, China's biggest maker of railway cars, began trading Thursday in Hong Kong, where they were changing hands at 2.64 Hong Kong dollars late in the afternoon, only marginally higher than their public offering price of HK$2.60.
Meanwhile, Baoshan Iron & Steel lost 5.1 percent to 6.95 yuan and Industrial & Commercial Bank of China dropped 2.9 percent to 4.76 yuan.
CITIC Securities advanced, however, gaining 3.7 percent to 19.40 yuan following reports a company official had denied holding talks with Lehman Brothers on a possible stake investment.
Wednesday's rally proved to be short-lived, thanks mainly to the lack of any official comment on whether the government would really go ahead with a raft of market-boosting measures as mentioned in the JPMorgan report. The report gave no indication of the source of the information.
Analysts said such announcements could only come from the State Council or Cabinet, which did not respond immediately to a request for comment. The state-run media, which often offer hints regarding such policy moves, remained silent on the issue, with reports on the share rally mentioning only "share stimulus rumors."
Other economists were quick to cast doubt on the likelihood of major moves to boost spending at this time.
Despite worries over sagging demand for Chinese exports and shrinking profit margins for industries hit hard by rising costs, economists are forecasting economic growth this year of at least 9 percent, and retail sales and other indicators of domestic demand have remained robust.
Although the leadership has announced various piecemeal measures to help key industries, including textile exporters, its main preoccupation so far has been with controlling inflation.
"It's highly unlikely that the government would put forward a fiscal package sufficient to have a meaningful impact on growth," Jonathan Anderson, an economist with UBS, said in a report issued Thursday.
In another report, Merrill Lynch noted that the speculation over stimulus measures might stem partly from a recent government report suggesting that the government draft some contingency plans to help stimulate the economy if it slows. But the report was by the State Information Center, a government-affiliated research institute that is "far away from 'top leadership,'" it noted.
"China is clearly slowing and pessimism in the market is rampant, but we think expectations have overshot," it said.