Hong Kong stocks rise, led by technology, Shanghai ends little changed as producer price deflation eases

Hong Kong stocks finished moderately higher on Tuesday as an upbeat performance by technology and industrials helped to offset weakness in the property and mining sectors.

The Hang Seng Index erased a loss in the early going to close 0.35 per cent higher, adding 71.33 points to 20,228.14. The Hang Seng China Enterprises Index rose 0.36 per cent to finish at 8,480.98.

The industrial metal-sector led the fall with a 2.27 per cent drop, followed by coal stocks at 1.30 per cent and mining stocks which were 1.15 per cent lower.

“No strong rebound in the local equity market is expected in coming months,” Core-Pacific Yamaichi Hong Kong head of research Castor Pang said. “Hong Kong stocks may gain fundamental support after the index drops below 19,500 points.”

Among individual shares, Maanshan Iron fell 1.90 per cent and Jiangxi Coopers was down 2 per cent. Technology shares were standouts as Tencent tacked on 0.8 per cent and China Mobile added 1.6 per cent. CK Hutchison Holdings added 1.4 per cent to close at HK$93.85.

Pang said the city’s stock market will likely be in a recovery in the second half of the year as emerging markets see capital inflows following the US President election. “Stocks may be in uptrend in the second half of the year, but the pace will be slow,” he added.

The Shanghai Composite Index swung between gains and losses to close little changed, rising 0.02 per cent to 2,832.59 The CSI300, which tracks large companies in Shanghai and Shenzhen, closed 0.11 per cent or 3.49 points higher at 3,069.11. The Shenzhen Composite Index was down 0.11 per cent or 2.07 points to 1,802.27, while the Nasdaq style ChiNext closed flat at 2054.22.

Market turnover in Shanghai and Shenzhen was down 29.4 per cent to stand at 346.5 billion yuan (HK$414.89 billion) compared with Monday’s 490.6 billion yuan (HK$587.43 billion).

“The producer price index (PPI) and consumer price index (CPI) released on Tuesday were just OK, not that bad,” said Shen Jianguang, chief economist at Mizuho Securities Asia Ltd in Hong Kong. “The economic data sound better than expectations, which eased the concerns on China’s economy.”

Data released ahead of the start of trade showed China’s producer price index in April contracted 3.4 per cent, slightly better than expectations for a 3.7 per cent drop. Consumer prices for the month rose 2.3 per cent, matching expectations.

Mizuho Securities Shen said China’s stock market may face further downside risks, as central authorities said they will release a detailed plan soon to tackle the “zombie companies” problem.

His view was echoed by Core-Pacific Yamaichi’s Castor Pang, who said China may need five more years to complete its economic restructuring.

“China’s economy is just like a huge ship and it must slow down when changing direction,” Pang said.“During the process, ‘new China economy stocks’ will pick up.”