(Bloomberg) -- A sense of stability seems to be returning to Chinese stocks after weeks of turbulence, thanks to a raft of policy steps by authorities to revitalize markets.

While investors have said policymakers need to do more for equities to see a sustainable rebound, Beijing’s latest measures — including a cut on stamp duty for stock trading and curbs in share selling by major stakeholders — appear to have put a floor under the market for now.  

The CSI 300 Index ended little changed on Wednesday following gains in the previous two sessions. That took the advance in China’s onshore benchmark to 2.1% this week, putting it on track for its best performance since the end of July.  

China’s largest banks are preparing to cut interest rates on existing mortgages and deposits, the latest attempt by authorities to arrest a slump in the market and reach the 5% economic growth goal. The largest exchange-traded fund focused on Chinese stocks, Huatai-Pinebridge CSI 300 ETF, has seen a surge in inflow this month, a sign that some investors have been buying the dip and betting on a turnaround. 

“The light positioning among investors and robust earnings from the tech sector will propel the market higher and may eventually draw in some FOMO buying as well,” said Redmond Wong, a market strategist at Saxo in Hong Kong. “But for the longer-term, China needs structural reforms to boost its growth potential.” 

READ: China Mortgage Rate Cuts May Not Boost Buyer Faith: Street Wrap

State-run newspapers said the rebound in Chinese equities this week shows investor sentiment is improving. A-shares still have upside room as government’s steps to invigorate capital market help turn pessimism around, Securities Times reported, citing an analyst as saying. 

Yet, deepening financial stress among developers is keeping a lid on the broader market amid worries of contagion. Country Garden Holdings Co. is planning to issue new shares to pay off loans as it faces a cash crunch, while a state-run bad debt manager is suffering a bond slump. 

Foreign investors sold 2.5 billion yuan ($343 million) of onshore stocks on a net basis, on track for a record monthly withdrawal.   

The yuan weakened 0.3% offshore and fell 0.2% onshore on Wednesday after another stronger-than-expected fixing by the central bank. The People’s Bank of China has set the daily reference rate at a level stronger than the market estimates since late June. 

Financials Drop 

While analysts said a cut to mortgage and deposit rates will be largely positive, the measures will still lack the firepower to solve a myriad of problems plaguing China’s economy, including spiraling debt woes among developers. The impact will also vary across sectors. A CSI 300 gauge of financials slumped more than 1.2% amid persistent concerns over their margins. 

In Hong Kong, the Hang Seng gauge of Chinese shares erased its 1.2% gain to fall as much as 0.8%. 

READ: Chinese Banks Are Most Hated Sector by Foreigners: China Today

“Trading will likely stay volatile this week, until more policies are rolled out,” said Willer Chen, senior research analyst at Forsyth Barr Asia Ltd. “The news on mortgage rate cut is well expected by the market and has already been priced in.”

--With assistance from John Cheng and Iris Ouyang.

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