Chinese stocks head for second weekly loss after policy lending rate is left untouched

• Industrial and raw-material stocks were among the worst-performing industry groups, retreating at least 1.4 per cent

Chinese stocks capped a second straight weekly loss as investors were disappointed after the central bank unexpectedly left a policy lending rate unchanged, tempering optimism about an immediate loosening of monetary policy signalled by the premier.

The Shanghai Composite Index eased 0.5 per cent to 3,211.24 at the close on Friday, posting a 1.3 per cent loss for the week. Hong Kongs markets are closed through Monday for public holidays.

Industrial and raw-material stocks, which are more sensitive to the economic cycle, were among the worst-performing industry groups, retreating at least 1.4 per cent.

Traders were disappointed after the Peoples Bank of China kept unchanged the one-year rate on the medium-term lending facility, a funding tool for commercial lenders. The central bank also refrained from injecting liquidity into the financial system through open-market operations.That came even after speculation had mounted over further monetary policy loosening, with Premier Li Keqiang strongly hinting at a cut in the reserve requirement ratio (RRR) to stem a moderation in growth in a cabinet meeting this week.

“Given global inflation, chances of a massive loosening of monetary policies in the short term are low,” said Fei Xiaoping, an analyst at Dongguan Securities. “Even if there‘s a cut in the RRR, it will be in the form of a targeted one.”Investors are also eagerly awaiting China’s first-quarter economic data, due on Monday, to assess the impact of the extended lockdown in Shanghai that has already led to a suspension of production at electric-vehicle makers such as Tesla and Nio.Growth in the world‘s second-largest economy probably reached 4.3 per cent in January to March period, according to a survey of economists compiled by Bloomberg, putting in jeopardy the annual target of 5.5 per cent. Xpeng’s chief executive officer He Xiaopeng warned that China‘s car production could come to a halt in May unless the supply chain in Shanghai and its neighbouring region resumes, the latest sign of how China’s zero tolerance of Covid-19 has upended even the nations most upbeat industry.