China stocks inch higher as inflation data highlights sector divergence

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

At the close, China’s blue-chip CSI300 Index and Shanghai Composite Index inched up 0.3 percent each.

Hong Kong benchmark Hang Seng dipped 0.2 percent.

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 price changes for 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, shipping, defense and non-ferrous metal-related stocks led gains 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 0.8 percent. Biotech shares lost 1.7 percent.

Hong Kong-listed hotpot chain Haidilao slumped 9 percent after Bloomberg reported that its co-founder was selling 259 million shares through a family trust holding vehicle.

BofA Securities this week retained its 2026 growth forecast for China at 4.5 percent but lowered its 2027 and 2028 forecasts to 4.2 percent and 4.0 percent, 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.