Deflationary pressures cause China and Hong Kong stocks to decline

Due to concerns that deflationary pressures will continue to sap the vitality of the faltering economy, stocks in China and Hong Kong started the week on the back foot. This was because Beijing failed to announce any significant stimulus measures.

• Last Monday, the Shanghai Composite Index fell 0.6%, while China’s blue-chip CSI300 Index fell 0.8%. The Hang Seng Index in Hong Kong decreased marginally.

1. China has recently announced a number of small-scale initiatives to boost market confidence, help private businesses, and stimulate consumer spending, but the announcements have been vague and have not met investor expectations.
2. The most recent official data revealed that outbound tourism spending decreased and foreign direct investment plummeted in the second quarter, underscoring the difficulties China’s economy is facing.

1. “Weakening external demand will continue to be a net drag in the third quarter,” noted Carlos Casanova, senior economist for Asia at Union Bancaire Privée.
2. It is likely that deflationary pressures will prevail. We think that the majority of this negative impact would be attributed to reduced domestic demand and spillover effects from declining upstream prices.

• The market anticipates that consumer price inflation in China will have dropped from 0% in June to -0.5% in July. On Wednesday, China will present its inflation data.

1. On the mainland, most industries experienced a loss, with real estate shares and healthcare equities driving the decline.

1. Hua Hong Semiconductor, China’s second-largest chip foundry, opened 13% higher on its Shanghai debut but rapidly fell, reflecting the gloomy market sentiment.

• Only 2% of the stock rose at the session’s close, while Hua Hong’s Hong Kong-listed shares fell by almost 11%.

1. A healthcare stock index had a four-year low as a result of China’s escalating anti-corruption drive that is aimed at the industry.

1.  In Hong Kong, the tech index was essentially unchanged, but an index that tracks Chinese developers decreased by close to 3%.

- Published By Team Hongkong Journalist