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Shanghai Composite up 4.6%, CSI300 up 5.9%

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Hang Seng slumps 9.4%; record fall in property stocks

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Aussie dollar, iron ore, miners and luxury shares sink

(Updates to Hong Kong close)

SHANGHAI, Oct 8 (Reuters) - China's stock markets roared

back from a week-long break and climbed to their highest levels

in more than two years at the open, but lost steam after

officials failed to inspire confidence in stimulus plans

intended to turnaround a sputtering economy.

Hong Kong's Hang Seng index, catapulted to be the

top-performing major market this year by its sharpest weeks-long

rally in a generation , closed 9.4% lower - its heaviest fall

since 2008.

Economic planner chairman Zheng Shanjie told reporters China

was "fully confident" of achieving economic targets for 2024 and

would pull forward 200 billion yuan from next year's budget to

spend on investment projects and support local governments.

But his failure to detail sufficiently big or new measures

rekindled market doubts about Beijing's commitment to ensuring

the world's second-largest economy can climb out of its most

serious slump since the global pandemic and reach 5% growth.

The Shanghai Composite closed 4.6% higher while the

blue-chip CSI300 rose 5.9% - big moves but well off

gains of more than 10% seen early in a rollercoaster day where

turnover hit a record 3.45 trillion yuan ($489 billion).

"Ultimately for the rally to be sustainable, we need to see

more fiscal policy and more measures to support the economy and

the property market," said Vasu Menon, managing director of

investment strategy at OCBC in Singapore.

"A great deal of hope has been built into the strong rally

in recent weeks and we now need to see additional government

policy action to support the uptrend."

The fallout spread to China-exposed assets around the world.

The Australian dollar fell 0.5% and the yuan

headed for its sharpest drop in ten months.

Iron ore and other industrial metal prices slid, with the

steel ingredient down 5% in Dalian and London copper hitting its

lowest in a week.

Global miners Rio Tinto and BHP fell in

Australia and miners and luxury stocks

dropped in Europe.

FRENZY

Before the Golden Week break, China announced the most

aggressive stimulus measures since the pandemic and the CSI300

gained 25% over five sessions.

Flows on Tuesday were directed at broad index funds and

pockets of the market expected to benefit from government

largesse.

By midday nearly 20 exchange-traded funds traded at a

premium of more than 20% to the value of their assets, as funds

rushed in faster than they could be rerouted to buy shares.

The record turnover shows "massive profit taking as well as

fresh money inflow", said Wen Hao, a veteran investor in the

eastern Hangzhou city.

"It's still early stage of the bull market, and still a good

time to buy stocks," he said, recommending small-caps that

typically outperform blue-chips when the market is hot.

On Tuesday small companies outshone the large firms and the

biggest gainers were tech hardware makers, brokers, health care

companies and builders. Some of the frothiest winners from last

week turned top losers in Hong Kong.

The CSI semiconductor sub-index surged 17% and

a sub-index of brokers was up 10.6%. Thematic

indexes from biotechnology to defence

and electric vehicles rose more than 11%.

In Hong Kong, however, mainland property developers

fell 15.5%, the biggest one-day percentage drop on record.

Analysts said the selling reflected profit taking after a week

of gains and balancing mainland moves, rather than a mood shift.

"The returns between Hong Kong and Chinese stocks remain

largely parallel," said Sean Teo, sales trader at Saxo in

Singapore.

"This underperformance may be due to some investors

reallocating their funds from Hong Kong to Chinese markets,

where government stimulus is more direct."

($1 = 7.0562 Chinese yuan renminbi)