SHANGHAI, Jan 18 (Reuters) - China stocks extended their decline on Thursday, down to their lowest level in nearly five years, as China's patchy economic recovery and the prospect of limited stimulus kept investors away from riskier assets.
China's blue-chip CSI300 Index dropped 0.6%, its lowest level since early 2019, while the Shanghai Composite Index lost 1.6% by midday. Hong Kong shares stabilised from Wednesday's sell-off.
"Big rate cuts or quantitative easing were unlikely and authorities should rely more on fiscal policy to boost the economy," UBS chief China economist Tao Wang said in an investor call on Thursday.
Foreign capital recorded net selling of 519 million yuan ($72.13 million) via northbound trading link by the lunch break, after logging the largest net sell in more than a year on Wednesday.
Several ETFs linked to China's main indexes including E Fund CSI300 Index ETF saw trading volume and turnover surge for the past two days.
"The national team tried to buy ETFs tracking CSI300, where turnover notably spiked, but the market-wide selloff pressure persists," UBS analysts said in a note ahead of the market open on Thursday.
A strong U.S. dollar has also kept the yuan under pressure, which means less room for China's policymakers to cut interest rates.
($1 = 7.1958 Chinese yuan) (Reporting by Shanghai Newsroom; Editing by Sherry Jacob-Phillips)
