China's policymakers still have ammunition to counter the mainland's slowing economy, including supply-side reforms and subsidized housing, HSBC said.
In a note released Tuesday, the bank's economists said that runctions in China's equities and currency markets pointed to fresh fears about deflation and a hard-landing for the world's second-largest economy.
"It is increasingly clear that the concerns about economic growth has not gone away, but rather intensified over the past weeks, amplifying the already fragile sentiment," HSBC said.
Data this month showed China's economic growth rate slowed to a 25-year low of 6.9 percent in 2015, as the world's second-largest economy shifts away from its manufacturing roots. Meanwhile, the Shanghai composite is down around 25 percent since its most recent high of 3,651.76 on December 22, leaving it in a "bear within a bear" market. The index is off around 47 percent from its 52-week high of 5,166.35, set June 2015.
"It is therefore high time for policy makers to come up with a convincing package to support growth, one that includes greater fiscal expansion, continued monetary accommodation and necessary reforms to improve the supply side of the economies," HSBC said.