Hong Kong Stocks Fell Modestly, Following China’s Inflation and Crude Oil Rally

By Jia Yizhen

HONG KONG , Feb. 14, 2017

Hong Kong’s Hang Seng Index closed down 0.03 percent, falling for the first time after four days of gains, due to the unexpectedly high inflation data from China and the rise of crude oil prices.

In January 2017, China’s consumer price index (CPI) went up by 2.5 percent year-on-year and its Producer Price Index (PPI) for manufactured goods increased 6.9 percent year-on-year, according to data released Tuesday morning by the National Bureau of Statistics of China.

The increase of consumer inflation was within normal range while the producer price inflation rose much more than expected, Thomas Deng, Regional CIO Greater China and Chief China Strategist of UBS said in a phone interview. “People are a little bit concerned about tighter monetary policy of China’s central bank,” Deng said, “Such worry about interest growth might reflect on a minor pullback of stock markets.”

Analysts polled by Reuters also agreed that consumer inflation was still well within the government’s comfort zone of 3 percent, and few signs showed the jump in producer prices was filtering through to the broader economy.

Capital Economics China economist Julian Evans-Pritchard predicted in a Reuters report that China’s central bank would tighten more this year, but the main driver was credit risk and concerns of leverage and what’s going on in the property market rather than inflation.

Besides, with a weaker US dollar, Brent crude oil prices increased, which affected stock markets. “The rise of crude oil prices is beneficial for those oil output countries like Russia and Middle East countries, but it is not good news for oil input countries like China,” Deng added, “It hits the transportation industry most such as airline business, auto industry and shipping.”

Share prices of four main oil companies in Hang Seng Index fell, including China Petroleum & Chemical Corp., which dropped 1.29 percent, and CNOOC Ltd., which fell 1.55 percent. Transport company China Merchants Port Holdings Co Ltd declined 0.67 percent.

The Organization of Petroleum Exporting Countries (OPEC) started cutting oil output last month. Concerns about rising supply from U.S. shale output overshadowed the OPEC-led effort to cut global output, which supported the rise of oil prices, according to a Reuters news report. Cecile Gutscher and Jeremy Herron also wrote in Bloomberg market comment, “Investors are weighing rising U.S. crude stockpiles against output cuts from OPEC and other producing nations.”

 

-An Assignment of Global Financial Journalism

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