Hong Kong stocks rebound from 2-week low as China’s deepening deflation spurs policy easing bets

Chinese consumer prices fell 0.3 per cent year on year in July, the first decline in two years, while producer prices fell for the 10th month in a row, contracting 4.4 per cent

Country Garden Holdings and its property services affiliate extend losses after the developer reportedly missed coupon payments

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An electronic billboard displays the Hang Seng Index data outside the Exchange Square in Hong Kong. Photo: Yik Yeung-man

Published: 10:14am, 9 Aug 2023Updated: 4:30pm, 9 Aug 2023

Hong Kong stocks rebounded from a two-week low after China’s consumer and producer prices both slid into deflationary territory, stoking speculation the government will take further action to spur growth.

The Hang Seng Index rose 0.3 per cent to 19,246.03 at the close in see-saw trading. The Hang Seng Tech Index dropped less than 0.1 per cent and the Shanghai Composite Index retreated 0.5 per cent. Trading volumes on the Hong Kong stock exchange were 10 per cent below the 30-day average, according to Bloomberg data.

Hansoh Pharmaceutical Group and other drug makers rebounded while property developer Country Gardens Holdings extended declines on its debt woes.

Chinese consumer prices fell 0.3 per cent year on year in July, the first decline since February 2021, the statistics bureau said on Wednesday, while producer prices contracted 4.4 per cent, a 10th straight month of declines.

Deepening price falls are a sign that the government’s piecemeal supportive measures from the cut in the loan prime rate to the relief package for the property market have yet to feed their way into the economy that is grappling with shrinking demand and weak consumer confidence. A government report showed a day earlier that exports slumped by the most in three years in July and imports also contracted.

“It’s expected that more follow-up measures to stabilise growth will be implemented,” said Yu Tianxu, an analyst at Wanlian Securities. “That may lead to an improvement in the economic data and expectations of better market performance. Stocks may start an upward run.”