Hang Seng slides below 20,000 with Meituan, Geely pacing losses as China inflation hurts stimulus bets, US report awaited
- Meituan, JD.com and Geely lead early losses in Hong Kong after report showing faster inflation in mainland China last month
- US inflation data later today could influence the pace of future rate increases, with 69 per cent current odds for a 75-basis point hike in September
Hong Kong stocks slumped after consumer prices in mainland China increased by the most in two years, limiting room for policymakers to deliver further monetary stimulus. Regional markets wavered before an inflation report in the US.
The Hang Seng Index retreated 2.1 per cent to 19,588.83 at the local noon trading break, heading for the biggest setback in more than a week. The Tech Index declined 3.1 per cent, while the Shanghai Composite Index fell 0.4 per cent.
Meituan dropped 4.2 per cent to HK$168.60 and JD.com weakened 4.3 per cent to HK$218.80. Developer Longfor Group plunged 7.2 per cent to HK$23.20 and Anta Sports fell 5.4 per cent to HK$80.90. WuXi Biologics sank 9.3 per cent to HK$67.55.
“Economic data in June and July remains rather disappointing,” said Will Shum, research director at iFAST Financial in Hong Kong. “Given the size of the stimulus launched and also the aggressive monetary easing in May, [China] will take a wait and see stance to judge the effectiveness before pushing for another round of easing.”
Inflation in mainland China quickened 2.7 per cent in July from a year earlier, the fastest since July 2020, the statistics bureau said on Wednesday, from 2.5 per cent in June. Factory-gate prices gained 4.2 per cent versus 6.1 per cent in June. Both July figures, however, came in lower than market consensus.
Elsewhere, lingering worries about supply chain bottlenecks and shipping lane blockades around Taiwan issues are also undermining market outlook. Goldman Sachs estimates less than a 0.1 per cent impact on Taiwanese GDP, assuming disruptions are confined to selective non-tech products without extensive supply chain linkages.
China has extended its military drills around the island in reaction to US House Speaker Nancy Pelosi’s visit last week. Companies including Apple assembler Pegatron have distanced themselves from the political crossfires.
Separately, the US will report July inflation later today. Consumer prices could hit 8.7 per cent, according to economists polled by Reuters, easing from June’s 40-year-high 9.1 per cent rate. Traders were pricing in a 69 per cent chance of the Fed raising rates by 75 basis points at its September meeting, according to Refinitiv data.
“The Fed and other central banks face a difficult trade-off [of] trying to stabilise output or inflation, but not both,” BlackRock strategists wrote in their midyear outlook. “The Fed has boxed itself into responding to the politics of inflation, not to the economics of it. This has caused us to reduce portfolio risk.”
Major Asian markets fell on Wednesday. Taiwanese equities dropped 0.5 per cent. Japanese and South Korean stocks retreated 0.7 to 0.9 per cent, while Australian shares slipped 0.2 per cent.
Author: Cheryl Heng, SCMP