HONG KONG: China and Hong Kong stocks extended losses on Wednesday as data showed consumer prices fell into deflation in July, further undermining investor confidence.

** China’s blue-chip CSI 300 Index dipped 0.22%, and the Shanghai Composite Index fell 0.36%.

** Hong Kong’s Hang Seng Index edged down 0.06% and the Hang Seng China Enterprises Index slid 0.15%.

** China’s consumer prices fell into deflation in July, dropping 0.3% year-on-year, its first fall in over two years.

** Factory gate prices fell for the 10th consecutive month.

** The worsening consumer spending data dealt another blow to markets already weakened by plunging trade data on Tuesday.

** “Both CPI and PPI are in deflation territory. The economic momentum continues to weaken due to lacklustre domestic demand,” said Zhiwei Zhang, president of Pinpoint Asset Management.

** The CPI deflation may put more pressure on the government to consider additional fiscal stimulus, he said.

China stocks rise, led by financials

** Goldman Sachs analysts said in a note they expect PPI inflation, in year-over-year terms, to bottom out this quarter and CPI inflation to experience a “U-shaped” recovery in the coming months.

** Meanwhile, major state-owned banks were seen selling US dollars to buy the yuan in the onshore spot foreign exchange market, sources told Reuters, in a bid to slow yuan declines.

** Tech giants and mainland property developers listed in Hong Kong both fell about 0.7%.

** Top homebuilder Country Garden lost another 4.4% after a 14% slump on Tuesday as the company missed two dollar bond coupon payments.