Chinese stocks fell from a three-month high, dragged down by banks and insurers.
The Shanghai Composite Index slipped 0.1 percent at the close. Industrial & Commercial Bank of China Ltd. and China Life Insurance Co. led declines for financial companies. The benchmark gauge trades at the priciest levels since January after rebounding 15 percent from that month’s low. Consumer companies most immune to swings in the economy advanced with Kweichow Moutai Co. jumping to a 10-month high. The Hang Seng China Enterprises Index declined for a third day.
A report due next week will also probably show inflation climbed to 2.4 percent in March. While below the government’s 3 percent target, it may be enough to give it pause before easing monetary policy. An official factory gauge last week showed improving conditions for the first time in eight months, while industrial profits halted a seven-month losing streak.
“Policy swings could still create uncertainties in the Chinese markets,” said Tai Hui, the Hong Kong-based chief Asia market strategist at JPMorgan Asset Management. “We do have some stabilization in data, which is providing some support."
The Shanghai Composite halted a four-day winning streak, closing at 3,050.59. The gauge trades at 12.8 times projected 12-month earnings, the highest in three months, compared with 11.5 for the MSCI Emerging Markets Index, according to data compiled by Bloomberg.
The CSI 300 Index slipped 0.2 percent. The H-shares gauge fell 0.1 percent, while the Hang Seng Index in Hong Kong increased 0.2 percent.
A gauge of financial shares in the CSI 300 dropped 0.7 percent for the steepest loss among 10 industry groups. China Minsheng Banking Corp. declined 1.8 percent. ICBC retreated 0.7 percent. China Life Insurance slumped 1 percent.
Kweichow Moutai, the biggest Chinese liquor maker, jumped 4.8 percent, while rival Wuliangye Yibin Co. climbed 1.8 percent. Morgan Stanley named Kweichow Moutai as one of 13 stocks that will be able to withstand lingering deflation because of its pricing power.
China’s bond market is showing more concern about inflation. The data are scheduled to be released April 11.
“With food prices climbing continuously, inflation risk is surfacing,” said Gu Xiaoxiao, an analyst at Haitong Securities Co., which was graded the best in fixed-income research by China’s New Fortune magazine in 2015. “The increase in the consumer price index may be within the government’s target of 3 percent in the first half of this year, but it could break that in the second half. We predicted two more interest-rate cuts previously, but now it seems unlikely.”