China stocks extend gains as key services data lifts sentiment

HONG KONG: China and Hong Kong stocks climbed for a second consecutive session on Tuesday, recovering from steep losses last week, as a private-sector survey showed strong recovery in China’s services activity in July, lifting investor sentiment.

• China’s blue-chip CSI300 Index was up 0.3% by the lunch break, while the Shanghai Composite Index gained 0.5%.

• Hong Kong benchmark Hang Seng also advanced 0.3%.

• The S&P Global China General Services PMI rose to 52.6 in July from 50.6 in the prior month, marking the fastest expansion since May 2024, fuelled by stronger demand and a rise in new export orders.

• The S&P PMI is considered a better read of trends among smaller, export-oriented firms, particularly along the east coast.

• The data suggests service sector activity picked up pace in July, Goldman Sachs analysts said in a note, but the significant divergence between the official services PMI (which was down in July) and the S&P one implies “substantial variation across services sub-industries”, they added.

• Gains in Chinese stocks also tracked overnight Wall Street rally, fuelled by growing bets on U.S. interest rate cuts.

• Still, analysts expect some consolidation of gains in the next few weeks given the uncertainties on U.S.-China tariff rates and persistent domestic tough business environment.

• Limited signs of further progress appeared in recent tariff negotiations between the two countries have driven weaker positioning in China and Hong Kong stocks, Citi analysts said in a note.

• Some Hong Kong-listed firms have reported disappointing earnings, in contrast to the strong results from U.S. companies, particularly in the tech sector, which could lead to market consolidation, said Dickie Wong, Kingston Securities executive director.

• By sector, biotech firms jumped 2% to lead gains in Hong Kong. In mainland A-shares, Anime comic and game shares and bank stocks outperformed, up 1% each.

• Hong Kong-listed shares of electric car maker Nio slumped 6.8% by midday as July delivery falls month-on-month.