(Bloomberg) -- Bold policy steps to rejuvenate China’s economy weren’t enough to revive sentiment toward the nation’s stocks as investors saw little relief for the troubled property sector.

Key equity indexes ended Wednesday with modest gains after an earlier rally cooled through the day. It’s a familiar pattern that has played out amid China’s stock market rout this year, with several bouts of recoveries failing to last.  

The government’s latest push to boost growth with a rare increase in the budget deficit ratio and President Xi Jinping’s unprecedented visit to the central bank was a welcome sign for traders. However, the rally lost steam less than an hour after the market opened, suggesting skepticism still lingers. Also weighing on sentiment was builder Country Garden Holdings Co.’s first dollar bond default, the latest setback for the ailing industry.

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The CSI 300 Index of mainland shares closed just 0.5% higher, more than halving its earlier advance. The Hang Seng China Enterprises Index erased a bulk of its 3.5% gain to climb 0.9%.  

The moves come after the nation’s legislature approved a plan to raise the fiscal deficit ratio for 2023 to about 3.8% of gross domestic product from the 3% set in March, which includes issuing additional sovereign debt worth 1 trillion yuan ($137 billion) in the fourth quarter to support disaster relief and construction.   

Hu Yifan, regional chief investment officer at UBS Wealth management, said on Bloomberg TV that while cyclical sectors and infrastructure stocks may benefit, the measures likely won’t boost the property sector. 

Given the current market’s “super-depressed level,” the latest support measures could lead to some short-covering and trigger a rebound, said Willer Chen, senior research analyst at Forsyth Barr Asia Ltd. “But the key question is how long this is going to last,” as the support to the consumption recovery will be relatively small, he said. 

Foreign investors were again net sellers of onshore stocks after buying in the morning. They offloaded 1.3 billion yuan worth of shares, taking their net selling streak to the eighth session, the longest since August. 

Chinese traders were desperately looking for some good news after stocks hit several grim milestones over the past week. 

The CSI 300 Index had erased all the gains seen during their massive reopening rally that took off late last year. The Shanghai Composite Index was also on the brink of breaking through a critical 18-year trend-line that had offered support during previous routs. 

Market watchers saw limited support from the latest measures beyond short-term sentiment boost. The impact on corporate fundamentals may be limited, Morgan Stanley strategist Laura Wang wrote in a note, adding that the market will need “further positive developments” to ensure a sustained sentiment recovery. 

Still, positive signs in early earnings indicators suggest some dip buying may emerge. UBS Securities estimates profit growth of flat-to-5% for mainland companies in the July-September period, versus a decline in the previous quarter.  

“Valuations are still near trough levels and among the lowest in EM Asia,” said Marvin Chen, a strategist for Bloomberg Intelligence. “With more confidence in the earnings outlook, there is still potential for rerating.”

But caution prevails for now, as previous measures to rescue the slumping stock market have all fallen flat in the face of a deepening property crisis.   

China’s sovereign wealth fund bought exchange-traded funds on Monday, expanding its purchases beyond bank shares. That came after officials in recent months slowed the pace of initial public offerings, curbed sales by some top shareholders, cut the stamp duty on stock transactions and eased rules on margin trading. 

If the latest steps “signal greater willingness to expand the fiscal balance and shift spending away from local governments, then it should be more positive over time,” said Vey-Sern Ling, managing director at Union Bancaire Privee. But the rally won’t last if the stimulus ends at steps announced last night, he added.  

--With assistance from April Ma.

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