China stocks flat as consumer staples, liquor gains counter tech losses

HONG KONG: China stocks struggled for direction on Monday as gains in defensive sectors including liquor and consumer staples on rising consumer prices countered losses in tech shares.

• At the midday break, the Shanghai Composite index was down 0.03% at 3,996.26, after swinging between gains and losses during the morning session.

• China’s blue-chip CSI300 index was down 0.2%.

• Leading the gains, the CSI Liquor Index rallied nearly 4% to a three-week high and the consumer staple sector jumped 2.6% and was on track for its biggest single-day gain since April.

• China’s producer price deflation eased in October and consumer prices returned to positive territory, data showed on Sunday, as the government steps up efforts to curb overcapacity and cut-throat competition among firms.

• However, analysts say deflationary pressures are not yet over and additional policy measures are needed to further spur demand.

• Weighing on broader markets on Monday, the artificial intelligence sector index slid nearly 3% to a more than two-week low and the chip sector index weakened 1.3% as a correction for global tech shares continued over valuation concerns.

• The US Senate moved forward with a measure aimed at reopening the federal government and ending a 40-day shutdown that has caused an unprecedented economic data blackout.

• “We’re seeing limited catalysts in the near term due to external disruptions and soft domestic fundamentals. Don’t expect much more policy support either,” Kevin Liu, CICC’s research managing director and strategist, said in a note.

• Investors will probably wait for the next Fed meeting and resolution of the government shutdown to see if liquidity conditions improve. Before that, they would likely seek downside protection in dividend stocks while looking for entry points for growth themes during corrections, he said.

• In Hong Kong, the Hang Seng Index was up 0.6% at 26,403.05, and the Hang Seng China Enterprises Index rose 0.8%.