China stocks closed up on Monday, shedding some early gains but still finishing in the black. The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.3 percent, to 3,203.33, while the Shanghai Composite Index gained 0.2 percent, to 2,994.92 points.
Stocks were boosted in the morning session by muted inflation data released over the weekend, which analysts said boosts expectations the government will announce further stimulus in the second half of 2016. The annual inflation rate in June was 1.9 percent, the lowest level since January.
But finance shares lagged in the afternoon, with the CSI300 financial services down 0.2 percent on news that the banking regulator was investigating risks in the bill-financing business of some commercial banks. Gains were broad based with manufacturing, mining, and finance and insurance shares all rising. Investors await June lending data this week for evidence of any pick-up in business activity.
"Recently the market has been doing relatively well," said Zhang Qi, analyst at Haitong Securities in Shanghai. Consumer prices in June grew at their slowest pace since January, while producer prices extended their decline, reinforcing economists' views more support was needed to help the economy. June prices rose 1.9 percent from a year earlier, slightly faster than estimates but down from the pace in May, and producer prices fell 2.6 percent, more than the 2.5 percent fall forecast in a Reuters poll.
"On a monthly basis, CPI and PPI dropped by 0.1 percent and 0.2 percent, respectively, illustrating a softening trend and in line with the weakening growth profile," wrote Zhou Hao, senior emerging market economist at Commerzbank in Singapore in a note following the inflation data Sunday. "Further policy easing is still on the cards, and we hold our view that the PBOC will cut both interest rates and reserve requirement ratio this month." Total volume of A shares traded in Shanghai was 12.28 billion shares, while Shenzhen volume was 14.59 billion shares. Total trading volume of companies included in the HSI index was 1.2 billion shares.