China stocks rise as dismal GDP data raises stimulus hopes

SHANGHAI (REUTERS) – China’s major stock indexes gained on Friday (July 15), led by consumer stocks after data showed a surprising rise in retail sales, and as dismal economic growth in the second quarter raised expectations of more stimulus.

The CSI300 index rose 0.4 per cent to 4,339.74 points at 10.36am, while the Shanghai Composite index gained 0.2 per cent to 3,286.85 points.

Consumer staples climbed 1.4 per cent and consumer discretionary stocks added 2 per cent after data showed that retail sales rose 3.1 per cent following the easing of Covid-19 restrictions last month. Analysts had expected a 0 per cent increase after May’s 6.7 per cent drop.

“The retail sales data is better than expectations, and I think the economy is on track for a recovery,” said Mr Linus Yip, chief strategist at First Shanghai Group.

Pinpoint Asset Management chief economist Zhang Zhiwei said: “Nonetheless, economic growth is still much lower than its potential, as the fear of Covid-19 outbreaks continues to hurt consumer and corporate sentiment.”

Gross domestic product rose 0.4 per cent year on year in the second quarter, missing expectations, official data showed, as widespread lockdowns to curb record Covid-19 cases hit industrial activity and consumer spending.

“Given the tame growth, China’s government is likely to deploy economic stimulus measures from now on to rev up its flagging growth,” said Mr Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.

Gains in markets were capped by losses among real estate developers and banks.

In recent weeks, growing numbers of home buyers have threatened to halt mortgage payments until developers resume construction of presold homes, according to official and social media outlets.

This would threaten to kill a nascent recovery in China’s capital-starved property sector and hit banks with hefty write-downs, analysts warned.

However, state media cited one official as saying that the China Banking and Insurance Regulatory Commission will strengthen coordination with the housing and construction authorities and the central bank to back local governments in “guaranteeing the delivery of homes”.

In mainland markets, banks lost roughly 1 per cent and real estate developers tumbled more than 3 per cent, while mainland developers listed in Hong Kong slumped roughly 3 per cent to a 10-year low.

At least 10 Chinese banks said mortgages related to risky property projects are relatively small, and risks are controllable.

Chinese Premier Li Keqiang said the government will support the economy while preventing inflation, state media reported on Thursday, signalling increased concerns over price rises.

The Hang Seng Index in Hong Kong was down 0.7 per cent at 20,612.07 points.

Tech giants traded in Hong Kong retreated more than 1 per cent, with Alibaba down more than 3 per cent, after the company was reported to be facing an inquiry linked to the theft of a vast police database.