China stocks struggle as central bank loosens monetary policy further

SHANGHAI (Reuters) - Chinese stocks were mixed on Tuesday as regulators tried to soothe investors' fears of a looming crash after markets plunged more than 20 per cent in the last few weeks.

The CSI300 index rose 0.4 per cent to 4,207.5 points by 0138 GMT, but the Shanghai Composite Index lost 0.9 per cent to 4,015.1.

China CSI300 stock index futures for July rose 1.5 per cent to 4,116.8, -82.48 points below the current value of the underlying index.

The Hang Seng index added 0.3 per cent, to 26,039.51 points. The Hong Kong China Enterprises Index gained 0.7 per cent, to 12,780.86.

China said late on Monday it is preparing to allow pension funds managed by local governments to invest in the stock market for the first time, potentially channelling hundreds of billions of yuan into the sagging equity market.

Separately, a China Securities Regulatory Commission (CSRC) spokesperson said in a blog posting on Monday evening that risks from brokerages' margin financing business are also controllable.

Also, China's central bank injected cash into the banking system in open-market operations, adding to a wave of monetary easing over the past week.

The People's Bank of China auctioned 50 billion yuan of seven-day reverse-repurchase agreements, according to a trader required to bid at the sales. The contracts were offered on Thursday for the first time in two months, injecting 35 billion yuan at 2.7 per cent, and on Saturday the central bank lowered benchmark interest rates as well as some lenders' reserve requirements.

Monetary policy is being loosened in the world's second- largest economy to help revive the slowest growth since 1990. The Shanghai Composite Index of shares is poised for a 13 per cent drop in June, trimming this year's advance to 24 per cent.