Hong Kong stocks rattled by fears China factory gate deflation may extend run

Producer prices may have dropped 0.8 per cent for the 21st straight month of declines, according to a consensus estimate of economists tracked by Bloomberg

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A vendor packs goods in plastic bags to be shipped at the Yiwu International Trade City in Yiwu, China, on March 1, 2024. China’s top leadership has pledged to meet economic targets for the year, avoid risks and maintain social stability, underscoring concern for a recovery hampered by a prolonged property crisis and deflation. Photo: Bloomberg

Published: 10:27am, 9 Jul 2024Updated: 4:59pm, 9 Jul 2024

Hong Kong stocks were sluggish before the release of China’s inflation report as investors feared factory gate deflation may extend its 20-month streak, indicating weak domestic demand.

The Hang Seng Index fell 0.83 points, or less than 0.1 per cent, to 17,523.23 at the close, the lowest close since April 25. The Hang Seng Tech Index added 1 per cent and the Shanghai Composite Index rallied 1.3 per cent.

Instant noodle maker Tingyi Holdings dropped more than 4 per cent after an increase in product prices raised concerns it could hurt offtake and Anta Sports Products sank after Citigroup said it is reviewing the stock in the downside direction.

China’s producer prices may have dropped 0.8 per cent in June, registering a 21st straight month of declines, according to a consensus estimate of the economists tracked by Bloomberg. Consumer prices probably rose 0.4 per cent from a year earlier in June, accelerating from a 0.3 per cent gain for the previous month, the consensus estimated. China’s statistics bureau is due to publish the inflation report on Wednesday before market hours.

A store of Anta, a Chinese sports brand is seen Nanjing Road Pedestrian Walkway on December 2, 2021 in Shanghai, China. The company’s shares fell after Citigroup put the stock on review in the downside direction. Photo: Getty Images

“Chinese stocks continue to demonstrate cautious sentiment, with both the Hang Seng Index and mainland index taking a back foot again, highlighting the prevailing unease ahead of the crucial inflation reading,” said Hebe Chan, Melbourne-based market analyst with IG International.