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
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%.
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%.
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%.
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.
China’s manufacturing activity shrank for a third straight month in June, though at a slower pace.
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.
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
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.
“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.