- Inflation slows to 1.3%, while producer prices extend declines
- China Construction Bank leads losses for lenders after rally
China’s stocks fell for the first time in five days as slower-than-forecast inflation increased concern demand is weakening in the world’s second-biggest economy.
The Shanghai Composite Index slipped 0.4 percent to 3,631.61 at 9:42 a.m. local time, halting a four-day, 10 percent rally. Financial and industrial companies led declines, with China Construction Bank Corp. and China Railway Group Ltd. both dropping 1.9 percent. The consumer-price index rose 1.3 percent in October, compared with a 1.5 percent median estimate in a Bloomberg survey. The producer-price index fell 5.9 percent, extending its streak of negative readings to 44 months.
The Shanghai Composite’s relative strength index approached 70 on Monday, signaling overbought conditions. The index has rebounded 25 percent from this year’s low in August as the government took measures to end a $5 trillion rout and policy makers introduced stimulus to boost economic growth, including a sixth reduction in interest rates in a year.
“There is a bit of a pull back after the recent rally with the CPI not helping,” said Gerry Alfonso, a trader at Shenwan Hongyuan Group Co. in Shanghai. “The low CPI figure is an indication that domestic consumption is perhaps a bit weaker than expected and that can create concerns. Banks are under-performing as the rally in recent days was very significant and investors are cashing in.”
The Hang Seng China Enterprises Index declined 1.2 percent. The CSI 300 Index lost 0.4 percent. Hong Kong’s Hang Seng Index slid 1.2 percent. Trading volumes in Shanghai climbed 32 percent above the 30-day average for this time of day.
The Bloomberg China-US Equity Index slumped 1.5 percent in New York as the possibility that the Federal Reserve will raise interest rates as early as December weighed on equities.
Margin traders increased holdings of shares purchased with borrowed money for a fifth straight day on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to 678.9 billion yuan ($107 billion).
— With assistance by Kyoungwha Kim