Traders wait to bet on new growth

The latest cut in bank interest rates for the first time in more than three years was widely welcomed, especially by the thousands of investors in the moribund stock market, as a timely boost for the economy, which seems to have lost its earlier momentum.

Many economists are predicting that further rate cuts are on the way, arguing that the decline in inflation to 3 percent in May left room for more ambitious economic stimulation measures. The stock market didn't seem to agree. Since the cut was announced on June 7, the Shanghai Composite Index, the most widely followed indicator, has continued to move listlessly. The much anticipated rebound in share prices and turnover failed to materialize.

Stock markets usually reflect investors' expectations of economic performance six months ahead. The rather lukewarm response of the Shanghai stock market to the latest rate cut showed that many institutional investors remain skeptical of the impact that the lower cost of money may have on the real economy, especially the export sector.