(Bloomberg) -- Chinese stocks saw their worst week in more than a month as investors looked for further catalysts to sustain a world-beating rally since the nation’s reopening.

The CSI 300 Index, a benchmark of mainland shares, fell 1% on Friday and also for the week, ending this year’s run of weekly gains. The Hang Seng China Enterprises Index, which tracks Chinese stocks trading in Hong Kong, lost 5% in its biggest five-day drop since the reopening euphoria started at the end of October.

The setback suggests sentiment is turning more cautious after optimism over China’s Covid Zero exit led to scorching gains over the past three months. While data during the Lunar New Year holidays pointed to a comeback in consumer spending, the economy has yet to regain its footing with weakness in the property market a key drag. 

“There is a growing divergence in views on the pace of recovery, with retail investors less confident and expecting only slow and gradual progress,” said Liu Dejun, managing director at Beijing Guanghua Private Fund Management Co. “Most institutional investors have increased exposure and remain upbeat over the long term.” 

Market reaction was muted even as officials said the border between Hong Kong and mainland China will fully reopen for the first time in three years. Daily quotas and testing requirements will be dropped and all boundary checkpoints will reopen from next week, according to the city’s leader John Lee. 

READ: Hong Kong-China Border to Fully Open in Boost for Hub Status (1)

Some of Friday’s worst performers on the Hang Seng China gauge were those that had posted the largest gains in this rebound, including Country Garden Services Holdings Co. and Baidu Inc.

Foreign investors offloaded mainland shares on Friday for the first time since Jan. 3, having boosted holdings at a record monthly pace. Mainland investors sold a net HK$17.5 billion ($2.3 billion) worth of Hong Kong shares this week, the most since 2021.

However, China bulls are likely to see the selloff as a short-term correction, rather than the start of a downturn. Analysts at Citigroup Inc. this week said the reopening trade has more room to run amid the nation’s strong economic outlook, while those at Jefferies Financial Group Inc. anticipate an upgrade in earnings estimates.   

“I don’t expect the panic-selling of 2022 to return. However, it is good to be cautious given the strong rally,” said Qi Wang, chief executive officer at MegaTrust Investment in Hong Kong.  

--With assistance from John Cheng and Jeanny Yu.

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