Hong Kong stocks open firm as China inflation report triggers hopes of rising consumer demand

Hong Kong stocks open firm as China inflation report triggers hopes of rising consumer demand

Hong Kong stocks open firm as China inflation report triggers hopes of rising consumer demand

Hong Kong stocks rose, starting the week on a firm note, after an official report over the weekend spurred optimism that consumer demand was improving in the world’s second largest economy, with positive investor flows also boosting sentiment.

The Hang Seng Index advanced 1.4 per cent to 16,581.91 as of 9.48am local time. The Hang Seng Tech Index gained 2.3 per cent and the Shanghai Composite Index was little changed.

Alibaba Group Holding climbed 2.3 per cent to HK$72.95 and Tencent Holdings added 1.8 per cent to HK$274.60. Jewellery retailer Chow Tai Fook rallied 2.4 per cent to HK$11.96 on expectations surging gold prices may boost demand for the metal to preserve wealth values.

Consumer prices increased 0.7 per cent from a year earlier in February, China’s statistics bureau said over the weekend, rising for the first time since August. Producer prices dropped 2.7 per cent, marking the 17th straight month of falls, it said.

Economists largely attributed the gain in consumer inflation to seasonality, in which the Lunar New Year fell in February in 2024 against in January a year earlier.

“The recovery in consumer prices is a welcome sign of improved domestic demand,” said Erin Xin, an economist at HSBC Holdings in Hong Kong. “However, we are not yet out of the woods with trade still facing uncertainty and the property drag ongoing, which means policymakers will need to keep a proactive stance.”

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Xin said China’s central bank could cut banks’ reserve requirement ratio by 50 basis points and lower interest rates by 25 basis points in the second half of the year.

The Hang Seng Index dropped 1.4 per cent last week, the biggest weekly loss in a month, over disappointment from the lack of meaningful stimulus measures from the annual parliamentary sessions. Traders also fretted that state buying could wane once China’s onshore markets exhibit signs of stability.

Other major Asian markets all headed south. Japan’s Nikkei 225 tumbled 2.3 per cent on expectations that the nation’s central bank will end its negative interest rate in the policy meeting this month. South Korea’s Kospi retreated 0.1 per cent, while Australia’s S&P/ASX 200 lost 1.3 per cent.

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