Stocks end down, resources firms weigh

Chinese mainland stock indexes slipped on Thursday as the developers and materials sector weakened, offsetting gains in financial firms buoyed by expectations of another US rate hike.

The Fed on Wednesday said it would start to shrink its massive balance sheet next month and signaled one increase later this year. For months, markets had been steadily dialing back expectations of a third rise in 2017.

The blue-chip CSI300 index fell 0.12 percent to 3,837.82 points, while the benchmark Shanghai Composite Index lost 0.24 percent to 3,357.81 points.

The Fed’s tightening move would have a limited impact on the market in the short term, but over the long term it will be gradually felt, Cheng Shi, an economist at ICBC International Holdings, wrote in a research note.

The Fed’s pace of shrinking its balance sheet could accelerate in the second half of 2019, Cheng noted.

“If the markets fail to price in this policy shift, or underestimate its impact, then risk appetite will be dealt blows repeatedly,” he wrote.

Sector performance was mixed. Financial stocks were strong on prospects of higher rates, rising 0.7 percent.

Real estate firms extended losses to fall 1.3 percent, as more cities joined the country’s capital Beijing in raising mortgage rates.

Material firms were hit hard with a 1.7 percent decline, tracking losses in the commodities markets, as the dollar strengthened on the Fed’s announcement and investors took profits from this year’s sharp gains.