HONG KONG: China and Hong Kong stocks dropped in a volatile trading session on Monday as inflation data undershot estimates despite Beijing’s recent efforts, with analysts expecting more stimulus measures in a key policy meeting this week.

China, HK stocks rise to 3-week highs

• At the midday break, the Shanghai Composite index was down 0.4% at 3,390.62 points.

• China’s blue-chip CSI300 index was down 0.51%, with the consumer staples sector declining 0.75% and the real estate index sliding 1.98%.

• Hong Kong’s benchmark index, the Hang Seng Index, was down 0.57% at 19,753.26.

• Data released on Monday showed China’s consumer inflation weakened in November while factory deflation persisted, suggesting Beijing’s recent efforts to shore up economic demand are having only limited impact.

• The consumer price index rose 0.2% in November from a year earlier, hitting a five-month low and missing estimates, while the producer price index fell 2.5% year-on-year last month.

• With the headwinds persisting, investors await more policy direction from the Central Economic Work Conference (CEWC) this week, where policymakers are expected to chart the course for the country’s economy in 2025.

• Beijing is likely to recognise the growth headwinds from domestic demand weakness and external uncertainties, and set more supportive policy tones, economists at UBS said in a note to clients on Monday.

• “We expect the CEWC may call for higher headline fiscal deficit,” they wrote. Beijing could also allow more issuance of special government bond to support trade-in program of more consumer goods, and larger issuance of special local government bond to support local debt swap and property inventory destocking, they added.