Chinese mainland stocks will continue to trade under the cloud of uncertainty this week as the funds needed to push share prices higher will likely be a while in making their way back to the market after the Chinese New Year holidays.
Mainland stocks snapped a five-day winning streak on Friday after the country raised short-term interest rates on the first trading day after the holiday, a move signaling it has moved to a tightening policy bias, according to Reuters on Friday.
Investors will likely grow more cautious if the central bank continues to tighten monetary policy.
Experts advised investors to maintain a wait-and-see stance for the time being.
Still, domestic stocks have room to rise due to support from better-than-expected economic data in 2017, according to a report by eastmoney.com on Friday.
Investors should pay close attention to stocks related to defense and State-owned enterprise reform.
The People's Bank of China, the country's central bank, raised interest rates on open market operations by 10 basis points on Friday.
"The move has some impact [on the stock market]. First, it directly affects money market rates, and also it raised the expectation for further tightening," Reuters reported, citing Zhang Qi, analyst at Haitong Securities, who noted that declining bond prices hurt insurers' balance sheets.
Meanwhile, a series of controversial policies unveiled by U.S. President Donald Trump raised concerns of more trade and political frictions in the future, which dampened investors' confidence, media reports said.
Nearly all sectors on the mainland retreated on Friday.
The blue-chip CSI 300 index ended down 0.69 percent at 3,364.49 points.
The benchmark Shanghai Composite Index declined 0.60 percent to 3,140.17 points, while the Shenzhen Component Index slumped 0.47 percent to 10,004.84 points.
The ChiNext, the country's NASDAQ-style board, declined 0.50 percent to 1,876.76 points.
Sentiment in the Hong Kong stock market was also depressed by a slump in commodity prices on the mainland on Friday, which knocked shares of resource companies traded in Hong Kong, Reuters reported.
The benchmark Hang Seng index slipped 0.24 percent to 23,129.21 points on the day.
Most professional institutional investors are optimistic about the stock market's prospects in 2017, according to a survey by the Shandong-based newspaper The Economic Observer, which was based on interviews with 100 professional investors.
