Shanghai, Hong Kong stocks slip on China deflation worries

Reuters · 05/11/2023 00:53
Shanghai, Hong Kong stocks slip on China deflation worries

- Hong Kong and Shanghai stocks slipped on Thursday, as slow consumer inflation and deepening factory gate deflation data suggested an uneven recovery for China and stoked deflation worries.

** China's blue-chip CSI 300 Index .CSI300 edged up 0.1% by the end of the morning session, while the Shanghai Composite Index .SSEC slipped 0.1%.

** Hong Kong's Hang Seng Index .HSI lost 0.2%, and the Hang Seng China Enterprises Index .HSCE declined 0.1%.

** However, some other Asian shares rose as investors cheered signs of easing inflationary pressure in the U.S. after data showed consumer prices in April rose at a slower-than-expected pace.

** China's consumer prices rose at the slowest pace in more than two years in April, while factory gate deflation deepened, data showed, suggesting that more stimulus might be to boost a patchy post-COVID economic recovery.

** "The subdued inflation readings suggest post-COVID recovery momentum continued to weaken in April," said Ting Lu, chief China economist at Nomura.

** "China will likely experience a short period of CPI deflation in the coming months," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

** The weak consumer price rise reinforces the signals from this week's trade data suggesting domestic demand remains lacklustre.

** Shares in energy .CSIEN went down 0.9%, and artificial intelligence firms .CSI930713 dropped 1.1%. Meanwhile, energy .CSI399808 and media firms .CSI399971 jumped 1.5% and 3.4%, respectively.

** Tech giants listed in Hong Kong .HSTECH added 0.9%, with Alibaba 9988.HK up 1.6%.

** Separately, sources said China has told its "big four" state-owned banks to reduce the ceiling on interest rates they pay on some deposits, as banks face squeezed margins under the weight of huge inflows of savings and deposits amid rising economic risks.

(Reporting by Shanghai Newsroom; Editing by Rashmi Aich)