Stocks decline broadly as PBOC dashes stimulus hopes

Both the Shanghai and Shenzhen stock markets fell to their lowest levels in three and a half years again Wednesday, accompanied by a continuation of sluggish trading sentiment.

The benchmark Shanghai Composite Index lost 19.92 points, or 0.96 percent, to close at 2,053.24; while the Shenzhen Component Index decreased 129.45 points, or 1.54 percent, to finish at 8,270.91.

Hopes of monetary policy loosening dissipated as the People's Bank of China (PBC) again injected liquidity to the interbank market by conducting reverse repurchase agreements in its regular open market operation Tuesday, making a cut to banks' reserve requirement ratios (RRR) seem unlikely in the short term, analysts say.

Taking a cue from the overnight drop in the US stock market, the Shanghai Composite opened below the previous day's closing level before the heavily weighted oil, steel and brokerage sectors quickly dragged down the index. Although gains in topical sectors such as 3D printing and LED lights helped lift the benchmark into positive territory briefly, the Shanghai market was in retreat by the noon break.

Downward movement dominated the afternoon session, with the Shanghai Composite again ending at its lowest point since March 2009, wiping away the gains it posted Tuesday.

Most of the heavily weighted sectors that had contributed to the short-lived market rebound Tuesday experienced corrections Wednesday, with steel makers, brokerages, gold, oil and rare earth companies the worst performers for the day.

As investors opted to sideline themselves in the face of uncertainties surrounding monetary easing, trading sentiment remained bearish. The combined turnover of both indices was 92.49 billion yuan ($14.56 billion), nearly unchanged compared to Tuesday.