The Hang Seng Index lost 0.4 per cent to 17,113.36 on Wednesday, snapping a five-day winning streak. The Tech Index dropped 1 per cent, and the Shanghai Composite Index fell 0.6 per cent to a six-month low.
Tencent dropped 1.3 per cent to HK$373.80 ahead of its earnings card later today. Gaming firm NetEase lost 3.9 per cent to HK$133.70, and food delivery platform Meituan fell 1.3 per cent to HK$102.10. Wuxi Biologics declined 4.3 per cent to HK$11.22, while sister company Wuxi AppTec retreated 4 per cent to HK$33.25.
Sentiment soured after China’s total social financing and new loans data disappointed again due to weak credit demand. In particular, loans to the real economy shrank by 77 billion yuan (US$10.8 billion) last month, the largest drop on record and the first decline since July 2005.
“This exacerbates concerns of deflation and a liquidity trap, boding ill for consumption and investment,” analysts at Barclays including Yingke Zhou said in a note. The deleveraging cycle triggered by the collapsed housing bubble may be “only half done”, they added.
Meanwhile, fresh reports due on Thursday are likely to show more signs of tepid growth momentum in the world’s second-largest economy. Retail sales are expected to have grown by 2.6 per cent in July, a marginal improvement from the previous month, while industrial production growth is forecast to slow, according to consensus among economists tracked by Bloomberg.
Today’s loss puts an end to a five-day rally for the city’s benchmark index amid the broader region’s recovery from the heavy sell-off last week. Confidence in local shares also appeared to be weakening, as trading volume steadily declined to a six-month low.
China currently ranks as one of the least favoured markets in the region among Asian fund managers, with risk appetite for Chinese equities dropping into “panic zones”, according to a survey conducted by Bank of America.
“Structural bearishness on the China equity markets stays intact,” strategists including Ritesh Samadhiya wrote in a note. There is barely any interest in the near-term, while nearly 80 per cent of respondents think a derating is under way in China, they added.
Lifting the mood, the latest US data showed that producer prices rose less than expected last month, and a gauge of consumer prices, due later today, is expected to remain steady at 3 per cent. That reinforced traders’ bets that the US Federal Reserve will start its easing path when it meets next month.
Elsewhere, Zhejiang Weihua New Material, a chemical producer, jumped 36 per cent to 23.59 yuan on its first day of trading in Shanghai.
Other key Asian markets mostly gained, tracking overnight gains in the US. Australia’s S&P/ASX 200 Index climbed 0.3 per cent, Japan’s Nikkei 225 gained 0.6 per cent and South Korea’s Kospi Index added 0.9 per cent.