China, HK stocks fall as deflationary pressures weigh
Business
Market expects China's consumer price inflation to have declined to -0.5pc in July
SHANGHAI (Reuters) – China and Hong Kong stocks started the week on the back foot as the absence of forceful stimulus measures from Beijing sparked concerns that deflationary pressures will continue to sap the vigour of the flagging economy.
China's bluechip CSI300 Index was down 0.8 per cent on Monday, while the Shanghai Composite Index declined 0.6pc. In Hong Kong, the Hang Seng Index dipped slightly.
China has announced a series of incremental measures in recent weeks to support consumption, aid private firms and bolster market confidence, but there has been a lack of detail and moves so far have fallen short of investor expectations.
Underscoring the challenges China's economy faces, the latest official data showed that foreign direct investment plunged in the second quarter, while outbound tourism spending fell.
"Weakening external demand will continue to be a net drag in the third quarter," wrote Carlos Casanova, senior economist, Asia, at Union Bancaire Privée.
"Deflationary pressures will likely prevail ... We believe that most of this downside will be traced back to weaker domestic demand and spill overs from contractionary upstream prices."
The market expects China's consumer price inflation to have declined to -0.5pc in July, down from 0pc in June. China will release its inflation data on Wednesday.
Most sectors fell on the mainland, with real estate shares and healthcare stocks leading the decline.
Reflecting the weak market sentiment, Hua Hong Semiconductor, China's second-largest chip foundry, opened 13pc higher on its Shanghai debut but quickly faltered.
The stock ended the session up just 2pc, while Hua Hong's Hong Kong-listed shares slumped nearly 11pc.
An index tracking healthcare stocks tumbled to a four-year low amid China's deepening anti-corruption campaign targeting the sector.
In Hong Kong, the tech index was roughly flat, while an index tracking Chinese developers fell nearly 3pc.
