Following the announcement that China’s consumer prices plunged into negative territory in July, marking the first such drop in more than 28 months, the Chinese and Hong Kong stock markets saw falls on Wednesday.
The biggest publicly listed firms in Shanghai and Shenzhen are tracked by China’s CSI300 index, which had a loss of 0.31%. The Shanghai Composite recorded its third straight day of losses as it finished 0.49% down at 3,244.49 on the mainland Chinese markets, as the negative trend continued. Similar to this, the Shenzhen Component finished at 11,039.45, down 0.53%, while Hong Kong’s Hang Seng index barely climbed over the flatline in the last hour of trade.
The Consumer Price Index (CPI) for China showed a year-over-year decline of 0.3% in July, which was somewhat higher than the 0.4% estimate made by analysts polled by Reuters. This is the first time since February 2021 that the country’s inflation rate has decreased. Parallel to these developments, China’s Producer Price Index (PPI) revealed a significant 4.4% year-on-year fall in July, above the 4.1% projection made by experts in the Reuters poll.
In reaction to these numbers, worries regarding China’s economic development trajectory and the effectiveness of traditional stimulus measures have increased. These worries were voiced by Allianz’s Chief Economic Advisor, Mohamed El-Erian, in a post on the social networking website X (formerly known as Twitter).
Markets across the Asia-Pacific felt the effects of China’s economic news, with varying degrees of success. The Nikkei 225 index of Japan fell 0.53% to close at 32,204.33, while the Topix index fell 0.4% to close at 2,282.57. However, the Kospi index in South Korea experienced a 1.2% rise, snapping a five-day losing run, and the Kosdaq rose 1.86% to close at 908.99. The S&P/ASX 200 in Australia likewise had a rise of 0.37%, closing the day at 7,338.
The downgrading of numerous regional banks’ credit ratings by Moody’s the previous night caused a selloff in U.S. markets. The rating highlighted difficulties in commercial real estate portfolios, probable recession, and worries about deposit risk. The S&P 500 fell 0.42%, the Nasdaq Composite down 0.79%, and the Dow Jones Industrial Average fell 0.45%.
The offshore yuan strengthened slightly versus the dollar in reaction to the statement, trading at 7.2257.
