(Bloomberg) -- Chinese stocks listed onshore headed for their first decline in 11 days as traders grew impatient with the pace of Beijing’s stimulus measures, with sentiment also hurt by weak holiday-spending data.

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The benchmark CSI 300 Index slid as much as 7.4%, wiping out the gain of 5.9% it made Tuesday when mainland markets reopened after the Golden Week holiday. The gauge pared losses after the Ministry of Finance said it would hold a fiscal policy briefing on Saturday. An index of Chinese stocks listed in Hong Kong swung to a gain after dropping as much as 3.8% earlier.

While China’s markets rallied in recent weeks after a series of policy announcements designed to support the economy, enthusiasm over a stimulus-driven equity surge is cooling after the lack of any further major initiatives at a key policy meeting Tuesday. A growing number of strategists and fund managers say Beijing needs to back up its spending pledges with real money, while others have cautioned the rally has gone too far too fast as benchmark indexes surged over 30% in a matter of days.

“The market is tussling between expectation for more stimulus and economic realities,” said Yi Wang, head of quantitative investment at CSOP Asset Management Ltd. “Investors want to see a quick translation from stimulus measures into improving corporate earnings, better macro data — whether that’s with inflation, employment or local government debt. But there is a time gap between that expectation and the economic reality.”

Investors are starting to worry the rapid rebound in Chinese stocks since late September may prove to be yet another false dawn unless Beijing announces a strong fiscal package that can revive consumption and support the property sector.

The world’s second-largest equity market has had multiple boom-and-bust cycles. Confronted by slowing growth and disinflation, China swung into stimulus mode in late 2014, setting off a rally that crashed back to earth in mid 2015. The Shanghai Stock Exchange Composite Index more than doubled its level from October 2014 to June 2015, but then plunged more than 40% in two months.

Returning from a weeklong break, Chinese stocks began Tuesday’s session with a bang — the CSI 300 surged 11% at the open. But the enthusiasm faded as officials at the National Development and Reform Commission stopped short of announcing any more large stimulus measures.

“It seems that the authorities are expressing, perhaps through NDRC’s press conference yesterday, a degree of discomfort with the market’s euphoria, partly due to their difficult experience with the retail-driven market turmoil in 2015,” said Homin Lee, senior macro strategist at Lombard Odier in Singapore. “It will be still important for them to put forward a concrete game plan for fighting deflation later this month in the NPC Standing Committee meeting.”

Holiday Spending

The Hang Seng China Enterprises Index, which comprises Chinese stocks listed in Hong Kong, dropped more than 3% on Wednesday. It has erased all the gains made during the period onshore markets were shut.

China’s government bonds rallied as investors returned to haven assets amid the slump in stocks, with 30-year futures jumping as much as 0.8% and benchmark yields edging lower in the cash market.

Spending patterns during the Golden Week holiday suggest consumer sentiment remains muted despite some signs of stabilization after the barrage of stimulus.

Chinese tourists spent less during the week-long holiday that ended Monday than they did in the break before the pandemic. While travelers made 10.2% more trips during Golden Week than in 2019, spending only increased by 7.9%, according to data released by Ministry of Culture and Tourism.

Meanwhile, leveraged equity positions have jumped, rising a greater tailspin if the market drops and they need to be unwound. The outstanding amount of margin debt in Shanghai and Shenzhen exchanges rose to 1.54 trillion yuan ($218 billion) on Tuesday, up 7.4% from the last trading session on Sept. 30, according to data compiled by Bloomberg.

More measures may yet be coming from Beijing. The Ministry of Finance, which is typically tasked with issuing bonds to fund stimulus measures and additional spending, is expected to hold a briefing soon that could deliver the kind of stimulus that markets want to see. Banks including Morgan Stanley and HSBC Holdings Plc expect 2 trillion yuan in stimulus, while Citigroup Inc. put the amount at 3 trillion yuan.

While investors debate the fate of Chinese equities for the coming months, some global money managers are turning to selective stock-picking.

Louis Lau, a fund manager at Brandes Investment Partners based in San Diego, California, said it’s time to take profit in overbought sectors such as insurance, home appliances, EV batteries, EVs and autos. He sees value in industries such as internet, sportswear, Macau gaming, food and beverages and tourism.

“We are at a stage where stock selection becomes more and more important,” said Nicholas Yeo, head of China equities at abrdn Plc, speaking in a Bloomberg TV interview. “We are in a bull zone but there will be volatility. We maintain a long-term view on sectors like consumption, which is key to the economy in the long run.”

--With assistance from Winnie Hsu, Yiqin Shen, Abhishek Vishnoi, David Ingles, Yvonne Man and Tian Chen.

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