Hong Kong equities fall after China's inflation data suggests a slow post-Covid recovery

Hong Kong stocks fell after mainland China's inflation fell more than expected last month, indicating that the economy's recovery remains sluggish. JD.com and SMIC both advanced ahead of their findings.

The Hang Seng Index fell 0.2 percent to 19,721.83 at the local midday trading break, wiping up gains of up to 0.5 percent earlier. The Tech Index gained 0.9%, while the Shanghai Composite Index fell 0.1%.

Longfor Group down 2.9 percent to HK$20.10, while Country Garden fell 2% to HK$1.93. Meituan dropped 1.1% to HK$127.60, Tencent Holdings fell 0.5% to HK$329, while NetEase dropped 0.3% to HK$138.10. PetroChina, Sinopec, and CNOOC, China's three largest oil companies, fell by 0.9 to 1.9 percent.

To limit losses, Chinese chip giant Semiconductor Manufacturing International Corporation rose 1.9% to HK$20.05 and peer Hua Hong Semiconductors rose 0.5% to HK$28.05 before both companies released their first-quarter earnings reports later today.

The National Bureau of Statistics reported on Thursday that consumer prices in China grew 0.1% year on year in April, the weakest rate in more than two years, indicating that China's post-Covid recovery remains sluggish. While service prices increased by 1% year on year, the largest in four months.

Separately, producer prices fell 3.6% last month, following a 2.5% decline in March, according to the statistics agency, strengthening a deflationary trend.

“The market sentiment is quite cautious now,” said Gary Ng, a senior economist at Natixis.

Despite services inflation pointing to a rebound, the consumer price index data show China's post-Covid recovery is slower than the market expected, he said, adding that producer price index deflation indicates the nation's manufacturing sector remains under pressure amid a global economic downturn.

Meanwhile, inflation in the United States has slowed, with the annual increase in consumer prices decreasing to 4.9 percent in April, raising optimism that the Federal Reserve may begin cutting interest rates this year to help the economy. According to CME's FedWatch tool, the market has priced in a rate cut in September at about 80%.

On Thursday, two new stocks were listed. In Shanghai, Yonyou Auto Information Technology fell 14% to 29.15 yuan, while Plus Group Holdings fell 1.9 percent to HK$10.40.

The major Asian markets were divided. The S&P/ASX 200 in Australia fell 0.4%, the Kospi in South Korea gained 0.3%, and the Nikkei 225 in Japan remained unchanged.

By fLEXI tEAM