SHANGHAI: China and Hong Kong stocks started the week on the back foot as the absence of forceful stimulus measures from Beijing sparked concerns that deflationary pressures will continue to sap the vigour of the flagging economy.
China’s bluechip CSI300 Index 0.8% on Monday, while the Shanghai Composite Index declined 0.6%. In Hong Kong, the Hang Seng Index dipped slightly.
China has announced a series of incremental measures in recent weeks to support consumption, aid private firms and bolster market confidence, but there has been a lack of detail and moves so far have fallen short of investor expectations. Underscoring the challenges China’s economy faces, the latest official data showed that foreign direct investment plunged in the second quarter, while outbound tourism spending fell.
“Weakening external demand will continue to be a net drag in the third quarter,” wrote Carlos Casanova, senior economist, Asia, at Union Bancaire Privée.
“Deflationary pressures will likely prevail ... We believe that most of this downside will be traced back to weaker domestic demand and spillovers from contractionary upstream prices.”
The market expects China’s consumer price inflation to have declined to -0.5% in July, down from 0% in June. China will release its inflation data on Wednesday.
Most sectors fell on the mainland, with real estate shares and healthcare stocks leading the decline.
Reflecting the weak market sentiment, Hua Hong Semiconductor, China’s second-largest chip foundry, opened 13% higher on its Shanghai debut but quickly faltered.
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