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By Summer Zhen
HONG KONG (Reuters) -Investors are waiting for a big burst of stimulus from China before they make more aggressive bets on a recovery, having spent the past few months disappointed by economic data and a lack of meaningful policy response from Beijing.
The country's promising recovery early in the year has faltered so quickly that authorities have cut interest rates, but some feel by not nearly enough, and foundering confidence has analysts slashing economic growth predictions.
For global money managers still in the market, patience, caution and stimulus are the watchwords for the outlook after the stock rally many hoped heralded the beginning of a long bull run also evaporated with the economic momentum.
A global fund manager survey by BofA Securities showed shorting Chinese stocks was the second-most "crowded" trade in June, after going long on big tech.
Hedge funds were major buyers in June, according to Morgan Stanley, but such investors with short trading horizons only underscore the fragility of the recovery.
Chinese blue chips are down 0.2% for the year and some 34% below their record peak in early 2021, while Hong Kong's Hang Seng is down 15% since January. Foreign cash has more or less stopped coming since a surge in January.
The yuan plumbed seven-month lows after a smaller-than-expected interest rate cut raised doubts whether policymakers would act forcefully enough to support the economy.
Market bulls are clinging to twin hopes: that more help arrives and that it will be enough to repair battered sentiment.
"Ten basis points doesn't do much," said Dong Chen, head of Asia macroeconomic research at Pictet Wealth Management, referring to cuts in the short-term lending rate and one-year medium-term lending facility loans.
"But the point is the policy signal. With increasingly more policy measures, hopefully they can turn around this very cautious sentiment."
Others are hopeful of a rebound due to cheap valuations.
"I can't believe that there is anymore bad news to absorb," said Andy Maynard, head of equities at China Renaissance.
"The market has seemingly already discounted all negativities into the equation," he said, suggesting opportunistic optimism - such as bargain hunting beaten-down retailers - can work well for the rest of the year.
Official data showed a modest 23 billion yuan ($3 billion) in offshore investors' net buying of mainland stocks this month so far for a year-to-date total of 190 billion yuan, most of which occurred in January.