China stocks dip after data shows economy’s contraction, while cuts in mortgage rates boost property developers in Hong Kong
- Shanghai Composite Index drops 0.3 per cent while Hang Seng Index rises 0.3 per cent as property developers such as Country Garden and Longfor Group rallied
- Both Chinese industrial production and retail sales contracted last month
The Shanghai Composite Index lost 0.3 per cent to 3,073.75 at the close, the biggest loss since April 26. The Shenzhen Composite Index in southern China fell 0.3 per cent to 1,926.01. The Hang Seng Index rose 0.3 per cent at the close to 19,950.21 in see-sawing trading, with the benchmark changing directions 10 times throughout the trading day.
Alibaba Group Holding, China’s largest e-commerce platform an owner of this newspaper, rose 2.9 per cent to HK$84.60. Xiaomi, one of China’s largest maker of smartphones, rose 0.7 per cent to HK$11.12. Baidu, China’s dominant internet search engine, rose 2.1 per cent to HK$113.20 in Hong Kong.
Country Garden Holdings rose 10.4 per cent to HK$4.88, while Longfor Group Holdings advanced by 4.8 per cent to HK$38 on the Hong Kong exchange, Chinese regulators cut mortgage rates for first-time homebuyers in a bid to spur growth. China Overseas Land and Investment (Coli) gained 2.2 per cent to HK$23.70.
Sentiment remained skittish after official data – released on Monday morning after markets opened – indicated that both Chinese industrial production and retail sales contracted last month, underscoring the damage that lockdowns and China’s zero-Covid policy have inflicted on its economy.
Industrial output dropped 2.9 per cent from a year earlier and retail sales slumped 11.1 per cent, according to the data released by the statistics bureau. Fixed-asset investments were the only bright spot in the economy, rising by 6.8 per cent because of increased government spending on infrastructure projects.
“The impact and the blow inflected by the pandemic to the economy will be reflected by the second-quarter economic data,” said Bruce Pang, a strategist at China Renaissance Holdings in Hong Kong. “The downside pressure on the economy will be increasing in the following one or two months, unless there’s more scientific classification of areas with medium and high risk, and an orderly push to resume production.”
Shanghai will lift its almost two-month lockdown in phases starting June 1 and aim to fully reopen the economy in the latter part of next month, the local government said on Monday. On Sunday, the city’s new infections dropped below 1,000 for the first time since March 24, official data shows.
A move by the central bank over the weekend to cut the mortgage rate for first-time homebuyers generated some buying interest in property stocks. The People’s Bank of China lowered the borrowing cost by 20 basis points in an effort to reverse a decline in home sales across the country.
Bailing out the troubled property market is among investors’ prerequisites before they can become more upbeat about stocks. Other requirements include interest rate cuts and the easing of a crackdown on the technology sector and Beijing’s zero-Covid approach.