China stocks inch higher, HK muted, as inflation data highlights sector divergence

HONG KONG: China stocks edged up while Hong Kong shares were flat on Tuesday as latest producer and consumer price inflation data highlighted uneven economic recovery, which weighed on market sentiment.  

China’s blue-chip CSI300 Index was up 0.1% by the lunch break, while the Shanghai Composite Index inched up 0.2%.

Hong Kong benchmark Hang Seng was unchanged. China’s factory-gate inflation gathered pace in August and consumer price growth quickened, driven largely by elevated energy costs tied to supply risks from the Middle East war, even as underlying domestic demand remained subdued.

Among the biggest price gains were those for non-ferrous metal smelting and processing as well as energy, while prices of household appliances slipped back into negative territory.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, said the August CPI and PPI were largely driven by commodity and food prices and service-related CPI remained subdued.

“I wouldn’t read the inflation data today as a sign of economic recovery,” he said.

By sector, coal, defense, energy and shipping-related stocks jumped on escalating Middle East tensions and rising oil prices.

Media and real estate sectors underperformed due to sluggish domestic demand. In Hong Kong, Hang Seng Tech dropped 0.6%.

BofA Securities this week retained its 2026 growth forecast for China at 4.5% but lowered its 2027 and 2028 forecasts to 4.2% and 4.0%, respectively, given headwinds to domestic activity and delayed policy easing.

“Policy inaction could persist even as economic data weaken further, exacerbating a volatile business cycle,” BofA Securities economists, led by Helen Qiao, said in a note.