(Bloomberg) -- Some exchange-traded funds tracking Chinese stocks saw a surge in turnover, a sign that state-backed funds are supporting the market after some investors expressed disappointment with the government’s growth target. 

The CSI 300 Index of mainland shares extended gains in the afternoon to close 0.7% higher, taking its advance this year to nearly 4%. In contrast, the Hang Seng China Enterprises Index slumped 2.6% on Tuesday, with tech and healthcare stocks leading the decline.

Premier Li Qiang unveiled an annual growth target of around 5% — unchanged from last year’s — and announced plans to step up fiscal stimulus with ultra-long bond issuance, both of which failed to meaningfully turnaround sentiment. Investors had been pinning their hopes on the most important political gathering of the year for an extension of the market’s rebound, and a failure to meet expectations may revive selloff pressure. 

Read more: China Needs ‘Forceful’ Measures to Hit 5% GDP Target, Funds Say

Traders are likely to show some disappointment with China’s targets for GDP growth and budget deficit, said Xin-Yao Ng, an investment director at abrdn Asia Ltd. “Investors still will like more forceful fiscal measures to boost the economy,” he said. “Government spending, at least based on this, doesn’t seem to provide an added boost to the economy.” 

Investors have also been counting on Beijing to address the nation’s property crisis and lay out plans to bolster consumer demand. Policies from the gathering — with further details expected over the coming days — will test the strength of the nascent stock market rebound. 

Turnover traded on the E Fund CSI 300 Index surged to a record 9.3 billion yuan ($1.3 billion), while that on the China AMC CSI 500 ETF jumped three times its three month average. Other products tracking small-gap gauges also rose.  

Foreign investors added more than 1.5 billion yuan of mainland shares via the trading links with Hong Kong.

Fiscal Stimulus 

Meantime, the yield on China’s 10-year sovereign bonds fell three basis points even as Premier Li outlined plans to issue 1 trillion yuan of ultra-long special central government bonds this year — a massive boost to supply. Investors say the country’s uncertain growth outlook will justify further monetary easing, helping absorb the spike in issuance.    

Chinese equities have rebounded in recent weeks as a growing list of support measures helped alleviate bearish sentiment that had sent the CSI 300 Index to a five-year low in February. Yet with some of the gains being driven by state-fund purchases, investors have doubted the sustainability of the rally especially in the face of growth headwinds.

In Hong Kong, the HSCEI gauge was dragged lower by technology names after Bloomberg News reported that Advanced Micro Devices Inc. will need to get a US government license to sell its powerful AI processors to Chinese customers. The Hang Seng Tech Index lost 4.3%. 

For the first time since 2019, the NPC’s work report omitted the slogan that “housing is for living in, not speculation.” The phrase has consistently been used by officials since 2016 as a means to signal Beijing’s intention to cool an overheating market.

While the removal of the phrase was seen as positive for property firms, a Bloomberg Intelligence gauge of developer shares dropped as much as 2.9%, poised for its fifth straight session of declines. 

The China stock market may have seen a bottom given the “really cheap valuation,” but investor confidence remains weak and people are still worried about the property problems, said Paul Pong, managing director at Pegasus Fund Managers. 

--With assistance from Charlotte Yang, April Ma, Jeanny Yu and Wenjin Lv.

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