Hong Kong and China shares snapped winning streaks on Thursday after divergent Chinese April consumer and producer price data sparked a rotation out of growth-sensitive counters as investors braced for more economic data in the coming days. China's April annual consumer inflation quickened to 2.4 percent, more than a 2.3 percent Reuters consensus, while producer prices saw a 14th straight monthly decline, dropping 2.6 percent, worse than an expected 2.3 percent dip.
The Hang Seng Index slipped 0.1 percent to 23,211.5 points after closing on Wednesday at its highest since February 20. The China Enterprises Index of the top Chinese listings in Hong Kong fell 0.2 percent. It was the first loss in five days for both. The CSI300 fell 0.6 percent from Wednesday's six-week closing high in its first loss in six sessions. The Shanghai Composite Index also closed down 0.6 percent, ending at 2,233 points in its first loss in five sessions.
Losses came in the strongest Shanghai volume since April 19. Hong Kong turnover was just below its average in the last month but some 14 percent below Wednesday's level, with short selling accounting for 9.1 percent of total turnover. "Uncertainty is never good for the market. The bigger-than-expected drop in April's producer prices is worrying, but there is probably not much room to ease policy given that inflation was a little stronger than expected," said Cao Xuefeng, Chengdu-based head of research at Huaxi Securities.
Consumer staple counters such as Want Want China were weaker. Want Want slid 1.6 percent and was also hit by a downgrade by Bank of America-Merrill Lynch analysts by two notches from "buy" to "underperform". BofA-ML analysts also downgraded Tingyi from buy to neutral, pushing its shares down 0.4 percent, while Hengan International jumped 5 percent to a record high after BofA-ML upgraded its stock from neutral to buy.
Hengan is up 21 percent and Want Want is up more than 11 percent in 2013, while Tingyi is down more than 7 percent. GCL-Poly Energy slid 2.5 percent in Hong Kong after the European Commission agreed on Wednesday to impose punitive import duties on solar panels from China in a move to guard against what it sees as Chinese dumping of cheap goods in Europe.
The Chinese central bank was a further source of uncertainty, issuing bills for the first time since 2011, auctioning 10 billion yuan ($1.63 billion) of three-month bills. The People's Bank of China also drained 92 billion yuan this week. Growth-sensitive counters, particularly property-related sectors, were weaker. Anhui Conch Cement shed 2.1 percent from Wednesday's 2-1/2-month closing high in Hong Kong. Its Shanghai listing dived 3.8 percent.
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