China stocks shaky as markets await data cues; Financials lead HK gains

* SSEC -0.2 pct, CSI300 flat, HSI +1.1 pct

* China inflation data in line with market forecast

* Investors diverge toward China consumer stocks after
strong gain

SHANGHAI, July 10 (Reuters) – China stocks were tentative on
Monday morning, as some investors reconsidered their sectoral
preferences and awaited fresh catalysts ahead of a burst of data
due over the next week or so after the June inflation report met
market expectations.

Hong Kong shares gained over 1 percent, as a jump in
financials offset a tumble in raw material stocks.

China’s blue-chip CSI300 index was unchanged at
3,655.38 points by the lunch break, while the Shanghai Composite
Index lost 0.2 percent, to 3,211.31 points.

Small-caps underperformed, with the start-up board ChiNext
losing over 1 percent.

Markets shrugged off China’s inflation data, which met
expectations and did little to alter the view that economic
growth is cooling after a solid first quarter.

Producer price inflation was unchanged in June at 5.5
percent and remained well off highs seen earlier this year,
while June consumer prices rose 1.5 percent from a year earlier.

Capital Economics China economist Julian Evans-Pritchard
said that “with slowing credit growth likely to weigh on
economic activity in coming quarters … inflation will start
falling again before long.

“This will disappoint those hopping for a sustained period
of reflation that could help to erode corporate debt burdens.”

Chinese Premier Li Keqiang was sanguine about the outlook
even as he acknowledged that the economy still faced many
difficulties.

Most economists expect growth to cool off in the next few
quarters as the key real estate sector slows, while Beijing’s
crack down on debt risks raises financing costs in a generally
tighter funding environment.

China will release second-quarter gross domestic
product(GDP) on July 17, along with June industrial output,
retail sales and January-June fixed asset investment.

Sector performance was mixed on Monday, with energy
and coal shares dropping, while consumer shares rose
following last week’s correction.

UBS Securities analyst Gao Ting said that after stellar
gains in certain sectors such as consumer, investor views are
to diverge.

“Expectations for these stocks have begun to diverge, with
some investors seeing limited upside for quality consumer stocks
as valuations touch five-year highs after substantial YTD gains,
while others remain upbeat on the re-rating potential of leading
players.”

HONG KONG

Hong Kong stocks were firm, with the Hang Seng index
adding 1.1 percent, to 25,608.16 points, while the Hong Kong
China Enterprises Index rising 0.6 percent, to
10,314.86.

Sentiment was aided by a surge in COSCO Shipping’s
and Hong Kong’s Orient Overseas
International Ltd’s (OOIL) shares after the Chinese
shipping giant made a $6.3 billion offer for its smaller rival
on Sunday.

Index heavyweight Tencent Holdings Ltd rose over 1
percent, on news that the Chinese gaming giant will launch its
mega-hit smartphone game “Honour of Kings” in the EU and United
States this year.

(Reporting by Samuel Shen and John Ruwitch; Editing by Shri
Navaratnam)

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