Chinese equities dropped into negative territory on Thursday after a series of official indicators signalled slower economic momentum.
The move came after National Bureau of Statistics data showed China’s retail sales, investment growth and industrial output each grew at a slower pace than expected in May.
Retails sales growth showed a year-on-year increase of 8.5 per cent last month, missing a 9.6 per cent forecast from economists polled by Reuters. Total fixed-asset investment growth slowed to 6.1 per cent, compared to a 7 per cent Reuters forecast. And industrial output rose 6.8 per cent, just shy of a Reuters poll picking 6.9 per cent growth.
The CSI 300 index, composed of major Shanghai and Shenzhen stocks, was off 0.6 per cent after initially rising 0.5 per cent. Consumer, technology and healthcare stocks were among the worst performers on the index, each chalking up a fall of greater than 1 per cent. The index has now shed 6 per cent in 2018.
China-focused stocks in Hong Kong also fared poorly, with the Hang Seng China Enterprise index down 0.7 per cent.
Capital Economics expected domestic demand in China to soften over the coming months.
“The boost to industrial output growth from the removal of the government’s pollution controls at the end of March has now faded,” Capital Economics China economist Chang Liu said. “And with headwinds from slower credit growth increasing, economic growth looks set to continue to weaken in the second half of 2018.”
Commerzbank analyst Zhou Hao noted that the indicators “illustrated a rather sluggish growth picture” with the sharp fall for fixed asset investment sending the marker to a new record low.
“After seasonal adjustment, all the indicators point to a rapidly slowing momentum,” he said. “There is a clear spill-over effect from the financial deleveraging to the real sector.”
Across the Asia-Pacific region equities were also broadly lower after the US Federal Reserve raised rates and gave a bullish assessment of the country’s economy, presaging more tightening.