SHANGHAI — China stocks fell on Thursday as a slowdown in consumer inflation pointed to a weak economic recovery, while lingering geopolitical tensions curbed risk appetite. Hong Kong shares were mixed.
** China’s blue-chip CSI 300 Index dropped 0.4% by the lunch break, while the Shanghai Composite Index lost 0.3%.
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** Meanwhile, Hong Kong’s Hang Seng benchmark was up 0.2%, and the China Enterprises Index slid 0.1%.
** China’s consumer price index (CPI) in February was 1.0% higher than a year earlier, rising at the slowest pace in a year. That compared with the 2.1% annual rise seen in January.
** “The market expected the CPI inflation to decline, but it dropped much more than expected. This casts doubt on the strength of domestic demand recovery in the household sector,” said Zhiwei Zhang, president at Pinpoint Asset Management.
** Nomura said the low CPI inflation reflected a significant slowdown in exports, a sharp contraction in land sales and property markets, and a slow recovery in tourism.
* “The inflation downside surprise could slightly raise the probability of a moderate rate cut in the next couple of months,” Ting Lu, chief China economist at Nomura said in a note.
** Also dampening sentiment, President Xi Jinping said on Wednesday that China needs to improve its use of defense resources such as technology, supply chain and national reserves “to strengthen its army and win wars.”
** China food and beverage stocks declined 1.3% and tourism shares lost 1.1%.
** China semiconductor stocks extended gains on news that a Chinese company has started to commercialize photoresist – a key, light-sensitive material used for manufacturing chips. Shenzhen Ronda Photosensitive & Technology Co, which made the announcement, rose as much as 20% for a second consecutive day.
** Meanwhile, China superconductor stocks surged on reports of a scientific breakthrough.
** Hong Kong market had mixed sector performance, with the healthcare sector up 0.7% and utilities shares down 1.2%. The Hang Seng Tech Index barely moved. (Reporting by Shanghai Newsroom; editing by Eileen Soreng)