(Bloomberg) -- Chinese stocks added to their advance from Monday as some investors saw merit in Beijing’s latest measures to invigorate markets, even as doubts persisted over their long-term impact.

The CSI 300 Index finished Tuesday’s session 1% higher. That’s after a 1.2% gain in the previous session, when a 5.5% surge at the open cooled through the day. The moves follow weekend measures by authorities, which included the first cut in stamp duty since 2008 as well as curbs on share sales by major stakeholders. 

The absence of runaway gains shows investor sentiment remains cautious. While the measures are expected to boost trading activity, the economy’s growth woes are making market players hesitant to bet big on a turnaround. China’s local media urged investors to be patient as the latest support measures work their way through the market, with the Securities Times adding that they shouldn’t be skeptical about the effectiveness of the steps.

As the strong opening rally in Chinese stocks faded on Monday, some investors said the nation needs to unleash a big stimulus package, like it did in 2008, to revive confidence. Foreign investors were buyers of onshore Chinese stocks in Tuesday’s morning session but ended the day with sales of 680 million yuan ($93 million) on a net basis. Outflows this month via the trading links with Hong Kong are poised to reach a record. 

READ: Markets Show China Needs Stimulus ‘Bazooka’ to Woo Investors

The measures are “technical in nature in terms of trying to improve liquidity for the stock market, and what’s needed is fiscal stimulus to boost the real economy,” said Xin-Yao Ng, investment manager of Asian equities at abrdn Asia Ltd. “The consensus among foreign investors is that a large stimulus from Beijing is required to improve consumer and enterprise confidence.”

Chinese equities have largely had a miserable month amid a slew of disappointing economic data, renewed concerns about the property sector and an unfolding crisis in the nation’s shadow banking system. Before the weekend policy boost, the CSI 300 Index had lost about 8%. US-domiciled hedge funds are net sellers of Chinese ADRs year-to-date, according to Morgan Stanley.  

Current policy moves are a “good start in terms of rebuilding the confidence but they are insufficient” in terms of setting market direction, Winnie Wu, China equity strategist at Bank of America Corp., said in a Bloomberg Television interview. “I think what investors are fundamentally concerned about is the economy. It is the fundamental problems in property, in LGFVs, private sector, employment.”

Debt troubles at Chinese companies were again in focus on Tuesday. Property giant Country Garden Holdings Co. proposed a grace period of 40 calendar days for a maturing yuan bond, marking the distressed Chinese developer’s latest effort to avoid what would be its maiden default.

Separately, some dollar notes guaranteed by a unit of China Great Wall Asset Management Co. slid by the most this year, as analyst reports highlighted possible consequences from missed deadlines to release 2022 results.

Fiscal Spending 

Chinese authorities have held back from adding big stimulus given their determination to shift away from the debt-fueled growth model. Officials from the nation’s top economic planner and the finance ministry on Monday reiterated pledges to strengthen policy support and speed up government spending in the second half of the year.

The nation’s biggest state-owned banks are considering lowering deposit rates for at least the third time in a year, according to people familiar with the matter, as they ramp up efforts to boost the economy and protect margins.

Some market watchers remain bullish despite the recent turbulence. UBS Global Wealth Management said China stocks remain their most preferred allocation in Asia citing the nation’s supportive policy moves.

READ: Veteran Stock Picker Says China Risk-Reward Incredibly Favorable

In Hong Kong, the Hang Seng gauge of Chinese shares ended up 2.3%, boosted by gains in BYD Co. following solid earnings. The index closed up 1.2% in the previous session.

Other measures announced Sunday included a cut in deposit ratios for margin financing as well as a pledge by the China Securities Regulatory Commission to slow the pace of initial public offerings. The latter may help put focus on quality and likely improve the appeal of the nation’s primary market, where returns have lagged other Asian venues this year. Further, stock exchanges asked some mutual funds to avoid selling equities on a net basis, according to a report late Monday, citing people who asked not to be identified discussing private information.

Beijing’s steps may help shore up investors’ sentiment to a certain degree and marginally encourage trading activities in the near-term, but their long-term impact will be limited, Morgan Stanley analysts including Laura Wang and Fran Chen wrote in an Aug. 28 note. 

--With assistance from Charlotte Yang, Abhishek Vishnoi and David Ingles.

(Adds report of potential deposit rate cuts in the 11th paragraph.)

©2023 Bloomberg L.P.