HONG KONG: China stocks were flat on Monday, while Hong Kong shares pulled back after their best week in two months as manufacturing data showed continued contraction in the face of a fragile trade truce with the US
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At the midday trading break, China’s blue-chip CSI300 Index was little changed at 3,922.29 after gaining 2% last week, while the Shanghai Composite Index rose 0.2%.
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Hong Kong’s benchmark Hang Seng fell 0.4% after gaining more than 3% last week. The Hang Seng China Enterprises Index lost 0.5%.
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The defence sector rallied 3.8% to its highest since November, boosting onshore shares. The chip sector jumped 1.6% and the rare earth sector advanced 1.1%.
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However, the banking sector and the brokers sub-index declined by 0.9% and 0.8%, respectively, paring some of last week’s stellar gains.
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China’s manufacturing activity shrank for a third straight month in June, though at a slower pace.
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The official purchasing managers’ index (PMI) rose to 49.7 in June from 49.5 in May, data released on Monday showed, remaining below the 50-mark that separates growth from contraction.
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June’s PMI marked the third month of contraction for manufacturing, suggesting factory managers are struggling to find domestic buyers as overseas sales stutter amid frail trade truce with the US
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However, onshore investors turned less bearish on China’s near-term growth outlook as macro data so far this year has been more resilient than expected despite notable divergence between exports and domestic demand, analysts at Goldman Sachs said.
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“Onshore clients see a possibility for exports to be more resilient than feared in H2 and even beyond… domestic easing mode is ‘reactive’ rather than preemptive,” they added.
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