SHANGHAI: China and Hong Kong stocks were roughly flat on Friday on mixed economic data, while the market is expecting a key policy rate cut early next week.

China stocks rise on bargain hunting, policy expectations

• China’s blue-chip CSI300 Index dropped 0.2% by the lunch break, while the Shanghai Composite Index was roughly flat. Hong Kong benchmark Hang Seng Index was also flat.

• China’s exports grew 2.3% in December from a year earlier, data showed on Friday, adding to signs global trade is slowly turning a corner with the prospect of lower borrowing costs on the horizon.

• Meanwhile, China’s consumer prices declined for a third month in December, though moderated, while factory-gate prices extended their prolonged slide, highlighting persistent deflationary pressures in an economy struggling to mount a solid recovery.

• “Consumption will likely pick up into the Lunar New Year, but more stimulus is needed to boost household spending and eliminate deflationary pressure,” UBS analysts said in a note.

• There is growing expectation among market participants of a key policy rate on Monday, which may help boost demand and aid the economic recovery of the world’s second-largest economy.

• “The lingering deflationary pressure justifies the expectation of an imminent rate cut, which is widely expected to materialise in the one-year medium-term policy facility (MLF) yield decision next Monday,” said Ken Cheung Kin Tai, chief Asian FX strategist at Mizuho Bank.

• Sector wise, artificial intelligence (AI) shares were down 1.7%, while utilities stocks were up 0.9%.

• In Hong Kong, Hang Seng Tech Index dropped 0.3%, dragged down by electric carmakers, with Xpeng and Li Auto down 4.8% and 2.8%, respectively.