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1st LD-Writethru: Chinese shares edge down on mild inflation growth

Xinhua, April 12, 2017 Adjust font size:

Chinese shares dipped on Wednesday on the release of consumer inflation data, which grew mildly in March.

The benchmark Shanghai Composite Index edged down 0.46 percent to close at 3,273.83 points while the smaller Shenzhen Component Index closed 0.64 percent lower at 10,587.31 points.

The ChiNext Index, China's NASDAQ-style board of growth enterprises, lost 1.05 percent to close at 1,897.51 points.

The drop came as China reported consumer inflation data in March, which came in almost on par with market expectations.

The Consumer Price Index (CPI), a main gauge of inflation, grew 0.9 percent year on year in March, quickening from an increase of 0.8 percent last month, official data showed Wednesday.

The producer price index (PPI), measuring costs of goods at the factory gate, slightly eased the growth pace to rise 7.6 percent in March.

"The CPI may stay muted in the near term, as agricultural supply side reform may continue to depress food prices and the headline CPI until the fourth quarter, which lowers the probability of aggressive monetary tightening," said China International Capital Corporation in a research note.

Despite the overall sluggish performance, market signs indicated further upward potential. Margin lending, a practice in which investors borrow to buy stocks, increased significantly this week as investor confidence was restored.

Margin loans outstanding exceeded 930 billion yuan (134.9 billion U.S. dollars) on Tuesday, continuing from an upward trend and reflecting improved risk appetite by investors.

Most borrowed funds went into industries such as chemicals and steel, while sectors such as media and telecommunications suffered from an outflow of funds.

Over a billion yuan in margin loans were used to purchase shares of China Fortune Land Development and Hesteel Company on Tuesday, two firms related to Xiongan New Area.

Since the plan to establish the Xiongan New Area was announced on April 1, most Xiongan-related shares have surged for consecutive days at the daily limit of 10 percent, but the momentum slowed on Wednesday, with companies like Hesteel Company ending only slightly higher, and some even slumped.

The slower growth in Xiongan-related shares was reasonable as investors took profits, and it actually offered opportunities for retail investors to increase their shares for future gains, according to Yang Delong, chief economist of First Seafront Fund, a Shenzhen-based investment firm. Endit