SHANGHAI: China stocks fell for a fourth straight session on Friday, as a clutch of weak economic data darkened the prospects of a recovery in the world’s second-biggest economy, while Hong Kong shares also dipped.

China’s blue-chip CSI300 Index closed down 1.3% at a two-week low, while the Shanghai Composite Index declined 1.1%. Hong Kong’s benchmark Hang Seng index edged down 0.6%.

New Chinese bank loans tumbled far more sharply than expected in April, data showed on Thursday, adding to worries that the economy’s post-pandemic recovery is losing steam.

The weak readings came hours after data showed deflationary pressures were deepening in China, and days after news that imports had contracted sharply.

“Investor sentiment likely remains volatile amid a debate over the macro recovery strength. Based on our conversations with them, investors remain sceptical about macro recovery momentum as they see mixed signals pointing towards an unbalanced picture,” Morgan Stanley said in a note.

“Weakness in PMI and import data in April, and the spiking youth unemployment rate in March, have accentuated concerns that the macro recovery is losing steam.”

China banking stocks fell as anaemic loan demand and government guidance toward lower lending costs pushed lenders’ margins to record lows.

Resources and construction engineering stocks also declined on signs of economic softness.

Despite disappointing April loan growth, “we expect credit demand to recover further in the rest of 2023,” said Tao Wang, head of Asia economics and chief China economist at UBS.