SHANGHAI: China and Hong Kong stocks fell on Monday as mounting deflationary pressures heightened concerns over the country’s economic recovery amid escalating global trade tensions.
HK shares close week near three-year high
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China’s blue-chip CSI300 Index dropped 0.8% by the lunch break, while the Shanghai Composite Index lost 0.6%. Hong Kong benchmark Hang Seng slipped 2.1%.
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China’s consumer price index (CPI) in February missed expectations and fell at the sharpest pace in 13 months, while producer price deflation persisted, as seasonal demand faded and households remained cautious about spending amid job and income worries.
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Nomura’s chief China economist Ting Lu expressed concerns that the country’s economic growth will lose some momentum due to a pay-back effect from export front-loading, the escalating US-China trade tensions and waning momentum in the property market recovery.
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Mainland property developers traded in Hong Kong dropped 2%, even as China’s housing minister said property sector was showing positive changes and market confidence was improving.
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Over the weekend, China announced tariffs on more than $2.6 billion worth of Canadian agricultural and food products, retaliating against levies Ottawa introduced in October 2024 and opening a new front in a trade war largely driven by US President Donald Trump’s tariff threats.
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“The international agricultural market is highly substitutable, so the impact on China, a major consumer of agricultural products, is minimal,” said Kai Zhan, international partner at Chinese law firm Yuanda.
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But for agricultural producers in exporting countries, the tariffs will create significant economic and public opinion pressure, Zhan said.
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Defence stocks rose 0.6%, while agriculture shares shed 0.2%.
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Investor enthusiasm towards tech shares waned, with Hong Kong’s tech index falling nearly 3% after touching a three-year high last week. Artificial intelligence firms traded onshore slid 1.9%.
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