China and Hong Kong stock markets fell as deflationary pressures raised concerns over economic recovery amid heightened global trade tensions. Key indices displayed significant losses, and analysts fear slowdowns in economic growth due to reduced consumer spending and challenges in the property market.

On Monday, stock markets in China and Hong Kong experienced declines driven by rising deflationary concerns and uncertainties regarding economic recovery amid increasing global trade tensions. The CSI300 Index of major Chinese companies fell by 0.8%, while the Shanghai Composite Index dropped 0.6%. The Hang Seng Index in Hong Kong decreased by 2.1%.

Recent data highlighted that China’s consumer price index for February fell more than anticipated, recording the sharpest decline in 13 months. Additionally, producer price deflation continued as seasonal demand dwindled and consumer spending remained restrained due to fears surrounding employment and income.

Ting Lu, the chief China economist at Nomura, emphasized concerns about potential slowdowns in economic growth, citing factors such as a pay-back effect from previous export front-loading, increasing U.S.-China trade conflicts, and reduced momentum in the property market recovery.

Mainland property developers listed in Hong Kong saw a 2% drop in stock valuation, despite statements from China’s housing minister declaring improvements in the property sector and rising market confidence. Over the weekend, China implemented tariffs on Canadian agricultural products totaling over $2.6 billion in response to tariffs imposed by Canada in October 2024, marking an escalation in existing trade tensions.

Kai Zhan, an international partner at Yuanda, remarked that the international agricultural market is highly substitutable, implying minimal immediate impact on China, a significant consumer of agricultural products. Yet, these tariffs are expected to exert considerable economic pressure on agricultural exporters.

In the stock market, defense stocks rose by 0.6%, while agriculture shares declined by 0.2%. Additionally, investor interest in technology stocks cooled, with Hong Kong’s tech index dropping nearly 3% from a three-year high reached the previous week, and onshore artificial intelligence firms experiencing a 1.9% decrease.

In summary, the declines in Chinese and Hong Kong stock markets were propelled by mounting deflationary fears, sluggish consumer spending, and escalating trade tensions, particularly with Canada and the United States. Analysts forecasted potential challenges to economic growth stemming from impending trade repercussions and a cooling property market, while sector-specific outcomes varied across defense, agriculture, and technology stocks.

Original Source: www.hindustantimes.com

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