Cautious investors pull down mainland stocks

Sentiment ebbs as market waits for fresh policy cues from government

China's stock market continued its decline on Thursday, posting a fresh four-year low as investors adopted a wait-and-see approach.

The government is working to boost market sentiment, announcing a slew of measures to reduce liquidity concerns.

Analysts predicted the market will recover over a period of time, as investors await further concrete improvements.

The Shanghai Stock Exchange Composite Index fell 75.20 points, or 2.94 percent, closing at 2486.42, around 50 percent below its 2015 height. The Shenzhen Stock Exchange Component Index dropped 2.41 percent to close at 7187.49 points.

Losses in the gas, travel and leisure, and oil equipment services and distribution sectors led the decline.

Market pessimism was driven by uncertainties surrounding ongoing trade frictions with the United States and concerns related to the non-financial sector amid headwinds, experts said.

The government is adopting targeted measures to hedge liquidity risks, and more supportive measures can be expected to roll out, said Zhu Junchun, an analyst with Lianxun Securities.

Amid rising concerns about companies' stock-based collateral - by which shares are pledged as collateral for loans - some local authorities have taken steps to stabilize market sentiment, granting preferential policies to ease financing conditions and allowing financial institutions to renegotiate lending terms.

The local governments in Haidian district in Beijing, as well as Shenzhen and Shunde in Guangdong province have pledged to assuage liquidity concerns for listed firms at the local level, according to recent media reports.

Earlier this month, the People's Bank of China, the central bank, announced a 100-basis-point cut to banks' reserve requirement ratio, lowering the amount of funds banks are required to hold in reserve. The move eased pressure on the yuan.

While the stock market will rebound, more promising signs in the non-financial sector and major improvements in companies' profits are needed to help revive investor confidence, according to Guan Qingyou, chief economist with Rushi Financial Research Institute.

Liu Shiyu, head of the China Securities Regulatory Commission, met with a number of individual investors in Beijing last week, responding to their concerns. He said although the stock market feels like it is in the winter now, the spring is not far away since the winter has already come.