Hong Kong stocks fall for a third straight day after China's inflation data points to sluggish post-Covid recovery

Hong Kong stocks fell for a third day in a row after inflation in mainland China cooled more than expected last month, indicating the economic recovery remains sluggish. SMIC and Hua Hong Semiconductors rose before their results.

The Hang Seng Index lost 0.1 per cent to 19,743.79 at the close of trading on Thursday, erasing gains of as much as 0.5 per cent earlier. The Tech Index gained 1.3 per cent, while the Shanghai Composite Index dropped 0.3 per cent.

Tencent Holdings dropped 1 per cent to HK$326.40 and Meituan declined 0.4 per cent to HK$128.50. Developer Longfor Group slid 2.9 per cent to HK$20.10 and Country Garden dropped 1.5 per cent to HK$1.94. China's big three oil majors - PetroChina, Sinopec and CNOOC - dropped by 1.1 to 1.5 per cent.

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Limiting losses, Alibaba Group Holding rose 3 per cent to HK$82.65 and Baidu advanced 1 per cent to HK$115.60. Li Auto surged 16 per cent to HK$114.80, leading a rally in auto stocks after posting record quarterly profit.

Data from the National Bureau of Statistics on Thursday showed consumer prices in China rose by 0.1 per cent in April from a year earlier, the slowest in more than two years, in a sign that China's post-Covid recovery remains sluggish. While services prices jumped by 1 per cent year on year, the most in four months.

Separately, producer prices fell 3.6 per cent last month following a 2.5 per cent drop in March, the statistics bureau said, deepening a deflationary trend.

"The market sentiment is quite cautious now," said Gary Ng, a senior economist at Natixis.

The consumer price index data shows China's post-Covid recovery is slower than the market's expectations despite the services inflation pointing to a rebound, he said, adding that producer price index deflation indicates the nation's manufacturing sector remains under pressure amid a global economic downtrend.

Meanwhile, inflation in the US also cooled, with the annual increase in consumer prices slowing to 4.9 per cent in April, bolstering hopes the Federal Reserve will start cutting rates this year to shore up the economy. The market has priced in the chances of a rate cut in September at nearly 80 per cent, according to CME's FedWatch tool.

Chinese chip giant Semiconductor Manufacturing International Corporation and peer Hua Hong Semiconductors gained 2.4 and 0.2 per cent, respectively, before both release their first-quarter report cards later today.

Two stocks debuted on Thursday. Yonyou Auto Information Technology tumbled 14 per cent to 29.19 yuan in Shanghai, while Plus Group Holdings crashed 24.6 per cent to HK$7.99 in Hong Kong.

Major Asian markets were mixed. The S&P/ASX 200 in Australia and the Nikkei 225 in Japan were little changed, while the Kospi in South Korea lost 0.2 per cent.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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