THE frenzied rally in the United States-listed Chinese stocks is starting to cool off as investors debate whether Beijing’s pledge to stabilise financial markets can turn into concrete policies.

       The Nasdaq Golden Dragon Index fell as much as 8.2% Thursday, snapping a historic two-day rally as investors question whether Beijing can deliver on its promises to ease a regulatory crackdown and stimulate the economy.

       Alibaba Group Holding Ltd dropped as much as 8%, while shares of its e-commerce rival JD.com Inc dipped 9%. Baidu Inc and Didi Global Inc each declined by as much as 8%.

       “China has made this pledge a couple of times over the last year,” said Matt Maley, chief market strategist at Miller Tabak and Co. “However, they’ve come back and clamped down once again after just a few weeks. So the worry is whether this could happen again.”

       Beijing’s statement earlier this week had spurred a sharp turnaround for stocks after what seemed like a bottomless decline. Investors are expecting authorities to follow up their words with concrete action after news that China will not expand a trial on property taxes this year and a separate move aimed at reducing the cost of trading for equity investors.

       While China vice-premier Liu He’s vow to pay more respect to investors’ interests has prompted some analysts to say that the Chinese government might be nearing an end to punitive measures on Internet companies, some remain hesitant to dip back in.

       “We take the constructive messages from high-level Chinese policy makers positively. That said, we do not see a rush to turn outright bullish at the broad index level,” Morgan Stanley strategists led by Laura Wang said in a note dated Wednesday.

       A more sustainable rally in the market would depend on China’s stance on its Covid-zero strategy, easing of geopolitical tensions and a revival in the overseas initial public offering market, the strategists said.

       That’s in contrast to Credit Suisse, whose investment committee decided to upgrade Chinese equities to an overweight allocation yesterday, adding that they offer “attractive” upside potential as valuations remain depressed. The Nasdaq Golden Dragon Index is still more than 65% lower from its peak last year.

       Still, a long-standing dispute over American regulators’ access to US traded Chinese companies’ audits continues to weigh on investor sentiment.

       The US accounting watchdog said Wednesday that Beijing must provide complete access to audits of Chinese companies that trade in New York, setting a high bar for any deal that allows the firms to maintain their American listings.

       “The next several months will be critical for resolving the audit dispute, as China’s Securities Regulatory Commission continues to signal optimism about the prospects, but US regulators, who are under intense pressure from Congress to take a hardline stance on Chinese companies, have been circumspect,” said Xiaomeng Lu, director of Eurasia Group’s geopolitical practice. — Bloomberg

       For Anthony Saglimbene, a global market strategist at Ameriprise Financial, China’s policy turnaround creates an uncertain environment.

       “It seems clear that there was probably a moment where China felt it had to be more direct to calm markets,” Saglimbene said in a phone interview. “Now, we need to see it take more direct actions, like lowering rates, pumping liquidity into property markets.”

       Another concern for investors is China’s relationship with Russia as its war with Ukraine rages on. Beijing denied any efforts to help Moscow, and Chinese officials said they want to see the conflict end. All eyes will be on the planned dialogue US President Joe Biden has with Chinese President Xi Jinping late yesterday as the US leader looks to shore up global pressure on Russia to end the war. -- Bloomberg