China Stocks Struggle to Rally at Reopen Despite Upbeat Data

(Bloomberg) — Chinese stocks saw modest gains as onshore traders returned from the Lunar New Year holidays, with broader caution toward the market offsetting buoyant travel and spending data.

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The benchmark CSI 300 Index climbed 0.5% as of 10:56 a.m. local time on Monday, belying expectations of a bullish open after the Feb. 9-16 break. A gauge of stocks in Hong Kong had rallied nearly 5% in three sessions since it reopened on Wednesday while the Nasdaq Golden Dragon China Index jumped 4.3% last week.

Monday morning trading shows that doubts run deep over the China market’s longer-term prospects as the economy struggles with deflation and a property crisis. Investors were expecting a rally onshore after state media reported that about 474 million domestic tourist trips were made during the eight-day holiday, up 19% from the same period in 2019 before the pandemic.

“Onshore markets may be reopening with some positive momentum after holiday spending data was better than expected, but given the strong rebound entering the holidays it will take more measures to be sustained,” said Marvin Chen, strategist at Bloomberg Intelligence.

Mainland stocks had rallied ahead of the holidays as authorities sought to revive investor confidence, with state funds ratcheting up purchases, a slew of regulatory tweaks to reduce selling pressure and a surprise replacement of the securities regulator chief. The benchmark CSI 300 Index rebounded from a five-year low and climbed 5.8% in the week before the break.

It a meeting of the State Council on Sunday, Premier Li Qiang called for “pragmatic and forceful” action to boost confidence in the economy, underscoring the government’s concern with a struggling recovery and stocks rout.

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“It’s worth noting that this year’s Lunar New Year holiday spanned eight days, compared to the seven days in 2019,” said Redmond Wong, market strategist at Saxo Capital Markets. “Additionally, the average…