HONG KONG: China stocks erased earlier losses to close higher on Monday, while Hong Kong shares pulled back after their best week in months as manufacturing data showed some resilience in the face of a fragile trade truce with the US
China’s blue-chip CSI300 Index added 0.4% to hover near a three-month high. The Shanghai Composite Index rose 0.6%.
Hong Kong’s benchmark Hang Seng index fell 0.9% after gaining more than 3% last week. The index advanced more than 20% in the first half of the year, making it among the top performers among global markets.
The Hang Seng China Enterprises Index lost 1% on Monday.
The defence sector rallied 4.2% to its highest since November, boosting onshore shares. The chip sector jumped 1.6% and the rare earths sector advanced 2.1%.
However, the banking sector and the brokers sub-index declined by 0.3% and 0.5%, respectively, paring some of last week’s gains.
Data released on Monday showed the official purchasing managers’ index rose to 49.7 in June from 49.5 in May, marking the third month of contraction for manufacturing activities. A reading below 50 indicates contraction.
“Impact of the tariff truce has been limited and should not be overstated,” Nomura analysts said in a note.
Onshore investors have 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.
“Onshore clients see a possibility for exports to be more resilient than feared in the second half and even beyond,” they said, adding that investors have also lowered their expectations for more easing measures from Beijing.
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