China Deflation Worries Keep Indexes In Hong Kong and Shanghai Down

Li Chen
12 Jun, 2024
Hong Kong

Market indexes in Shanghai and Hong Kong traded down after the release of inflation data. 

Consumer price inflation rose for the fourth month in a row in May, but the increase of 0.3% in May fell short of market expectations. 

On a monthly basis, inflation decreased 0.1% after rising 0.1% in April, indicating persistent demand weakness amid a protracted property market slump and fragile economic recovery. 

The annual pace of retail inflation was steady, but food price inflation fell for the 11th month in a row, the National Bureau of Statistics reported on Wednesday. 

Core inflation, which excludes food and energy prices, rose 0.6% from a year ago, compared to a 0.7% rise in April. 

In a separate report, the statistics bureau said producer price inflation declined 1.4% in May after falling at a 2.5% annual rate in April. 

The factory-gate prices fell for the 20th month in a row and fell at the slowest pace since February 2023, amid persistent domestic demand weakness and rising job market uncertainty outside of the top three cities. 

Over the first five months, producer price inflation dropped 2.4% from a year ago, and the prices are expected to remain weak for the rest of the year. 

 

China Stock Movers 

The CSI 300 index decreased 0.2% to 3,536.85, and the Hang Seng index dropped 1.5% to 17,913.10. 

The Hang Seng index extended losses to 9% from the peak last month, as the market rally appears to lose steam amid a lack of consistent policy support and an ongoing decline in the residential property market. 

Tech stocks traded lower amid broad market weakness, and Tencent Holdings declined 0.6% to HK$371.20 and Alibaba Group fell 0.9% to HK$74.15. 

Real estate developers were under pressure ahead of the U.S. Federal Reserve's monetary policy decisions at 2:00 p.m. ET later today. 

The Federal Reserve is widely anticipated to hold the Fed Funds rate range between 5.25% and 5.50%, and the central bank is likely to signal higher rates for the rest of the year. 

Hong Kong monetary policy moves in sync with U.S. announcements because the Hong Kong dollar is linked to the U.S. dollar. 

Higher interest rates for longer are likely to dampen demand for new properties in Hong Kong, amid an ongoing economic slowdown and elevated home prices in the city. 

China Vanke declined 0.9% to HK$5.45, China Resources Land dropped 2.9% to HK$26.70, and Sun Hung Kai fell 1.1% to HK$71.95. 

Wuhan Dameng Database, the database developer for banks and state-owned power entities' stock soared nearly 190% on the first day of trading after the company priced its initial offering at 250 yuan per share. 

Tencent-backed QuantumPharm priced its initial public offering at HK$5.28 and raised HK$989.3 million ahead of its listing on Thursday. 

The public offering of artificial intelligence-based drug research service provider was oversubscribed by 75 times.