HK stocks slip amid China factory deflation worries
The Hang Seng Index ended down 255.75 points, or 1.06 percent, at 23,892.32 on Wednesday. File photo: RTHK
Mainland stocks ended lower on Wednesday, wiping out all intraday gains, due to worries over deepening factory deflation as firms cut prices amid weak demand.
In Hong Kong, the benchmark Hang Seng Index ended the day at 23,892.32, down 255.75 points or 1.06 percent. The Hang Seng China Enterprises index fell 1.28 percent to 8,597.27.
Up north, the benchmark Shanghai Composite Index closed down 0.13 percent at 3,493.05 while the Shenzhen Component Index closed 0.06 percent lower at 10,581.80.
The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, gained 0.16 percent to close at 2,184.67.
China's producer deflation deepened to its worst level in almost two years in June as the economy grapples with uncertainty over a global trade war and subdued demand at home, piling pressure on policymakers to roll out more support measures.
"Combined with the persistently negative GDP deflator, deflation remains a concern," said Lynn Song, chief economist for Greater China at ING.
Citi analysts said in a note that they remain "cautious on the inflation trajectory while waiting for more policy actions".
They added that further guidance from the upcoming Chinese Communist Party politburo meeting and action plans from the State Council and state planner could be worth monitoring.
On the trade front, US President Donald Trump said said he would impose a 50 percent tariff on imported copper and soon introduce long-threatened levies on semiconductors and pharmaceuticals, broadening his trade war that has rattled markets worldwide.
Trump also said trade talks have been going well with the European Union and China, though he added he is only days away from sending a tariff letter to the former.
"We have had a really good relationship with China lately, and we're getting along with them very well. They've been very fair on our trade deal, honestly," Trump said, adding that he has been speaking regularly with President Xi Jinping.
"It may boost market sentiment in the short term," said Deng Lijun, analyst, Huajin Securities.
"The new wave of tariff increases did not involve China, and the United States had lifted export restrictions to China for chip design software developers and ethane, and Sino-U.S. trade tensions have eased in the short term," Deng said, adding that risk appetite for A-shares may rebound once Beijing and Washington reach a tariff deal.
Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.42 percent, while Japan's Nikkei index closed up 0.33 percent. (Reuters/Xinhua)
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