China stocks inch higher, HK muted, as inflation data highlights sector divergence
HONG KONG: China stocks edged up while Hong Kong shares were flat on Tuesday as latest producer and consumer price inflation data highlighted uneven economic recovery, which weighed on market sentiment. China’s blue-chip CSI300 Index was up 0.1% by the lunch break, while the Shanghai Composite Index inched up 0.2%. Hong Kong benchmark Hang Seng was unchanged. China’s factory-gate inflation…
China's stock market saw a slight rise on Tuesday, while Hong Kong shares remained unchanged as new inflation data revealed uneven economic recovery, dampening investor sentiment. The CSI300 Index rose 0.1% by midday, while the Shanghai Composite Index increased by 0.2%. The Hang Seng Index in Hong Kong stayed flat.
China's factory gate inflation accelerated in August, and consumer price growth quickened, driven primarily by soaring energy costs linked to supply disruptions from the Middle East conflict. However, domestic demand remained weak. Energy and non-ferrous metal smelting and processing sectors experienced the most notable price increases, while household appliance prices declined further.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, stated that both the consumer price index (CPI) and producer price index (PPI) in August were largely influenced by commodity and food prices, with service-related CPI remaining flat. Zhang expressed skepticism regarding the inflation data as an indicator of economic recovery.
Sector-wise, coal, defense, energy, and shipping-related stocks surged due to escalating Middle East tensions and rising oil prices. Conversely, media and real estate sectors underperformed, primarily due to sluggish domestic demand. In Hong Kong, the Hang Seng Tech sector fell 0.6%.
BofA Securities maintained its 4.5% growth forecast for China through 2026 but reduced its projections for 2027 and 2028 to 4.2% and 4.0%, respectively, citing headwinds to domestic activity and delayed policy easing. BofA Securities economists, led by Helen Qiao, warned in a note that policy inaction could prolong a volatile business cycle even as economic data weaken further.
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