Chinese stocks rallied in the first day back from their long holiday, but disappointment that Beijing announced no further stimulus measures saw gains sharply pared and left Hong Kong with chunky losses.
The CSI 300 XX:000300, an index of the biggest mainland A-shares traded in Shanghai and Shenzhen, jumped 11% at the open on Tuesday as investors resumed buying after China's mainland markets were closed for the Golden Week break.
The CSI 300 subsequently lost much of its morning gains to finish the day up 5.9% - though that still left the mainland's stock barometer up 30% over the past month.
Hong Kong's Hang Seng index HK:HSI has been trading for much of the period when the mainland was closed, during which it continued to rally, hitting a 31-month high on Monday.
However, that left the Hang Seng especially vulnerable to any disappointment-led profit-taking, and it tumbled over 9% on Tuesday, led lower by property companies such as Longfor Group (HK:960), which lost 23%.
In premarket trade, casino stocks including Las Vegas Sands $(LVS)$ and Wynn Resorts $(WYNN)$ tumbled. U.S.-listed shares of Alibaba $(BABA)$ tumbled 9% and JD.com stock $(JD)$ dropped 12%.
Before the national holiday, the CSI 300 had risen nearly 27% over just 13 sessions as traders welcomed a multi-pronged batch of stimulus proposals from China's government that are designed to revive the world's second biggest economy and lift its stock market.
These measures include mortgage rate cuts to support the beleaguered housing sector, the reduction of bank's capital requirements to boost lending, and funds to allow companies to buy back their own shares.
Investors had been hoping that the National Development and Reform Commission, China's state economic planning body, would outline more stimulus measures at a briefing on Tuesday.
However, Zheng Shanjie, chair of the NDRC, left traders dissatisfied after revealing no fresh stimulus proposals and telling reporters at a press conference in Beijing that he had "full confidence" the economy would reach its official full-year growth target of about 5%.
"The market reaction speaks for itself, with investors disappointed by a lack of clarity over more forceful action as the NDRC continued to voice confidence in the economy. With investor expectations running high into the NDRC press conference, the outcome represents a setback for those anticipating additional swift action from Beijing," said a team of analysts at UBS led by Mark Haefele, global wealth management chief investment officer.
UBS added that they expect more volatility in Chinese stocks in the near term until Beijing clarifies the level of fiscal support for the economy; and such febrile action could be seen in Hong Kong.
"We see limited chance of meaningful demand stimulus near term, specifically one that is geared towards consumers. Foreign investors couldtake a 'not trust but verify' approach, evaluating Beijing's commitment on reflation," said Morgan Stanley's China economics team led by Robin Xing.
Concerns that China's stimulus may not provide the boost to activity of the extent some had hoped caused a sell-off in industrial commodities, with copper (HG00) down nearly 3% and crude oil (BRN00) down 1.5%.
Iron ore futures were also lower, noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank, "on the growing worry that the positive impact of the stimulus measures could remain short-lived, and that the measures would be insufficient to reverse the property meltdown, deflation and other structural problems - like the aging population and heavy local government debt burden."