Hong Kong stocks rebounded on Friday after producer prices in China unexpectedly rose for the first time in nearly five years, pointing to higher profits and giving companies more room to service their debt. By the lunch break, both the Hang Seng index and the Hong Kong China Enterprises Index were up 0.6 percent at 23,163.80 and 9,549.40 points, respectively. Stocks in China sagged, however, as investors took profits from gains earlier in the week.
The blue-chip CSI300 index and the Shanghai Composite Index each fell 0.5 percent, to 3,287.38 points and 3,045.14 points, respectively. The Hong Kong and China markets also looked set for divergent performances on a weekly basis. The Hang Seng was poised for a loss of close to 3 percent, the biggest in a month, while China’s indexes looked to advance around 1 percent. After a strong third quarter, Hong Kong shares have pulled back amid an increase in global market volatility ahead of the U.S. presidential election in early November and an expected U.S. interest rate hike in December.
Chinese shares have been buoyed by government plans to reduce a mountain of corporate debt, which could see more mergers and restructurings. But gains have been pared by concerns that fresh curbs on property speculation could hit developers and throw house prices into a correction. Shares of state-owned companies that have unveiled restructuring plans, including China United Network Communications and First Tractor remained firm on Friday.
Shares in listed subsidiaries of Sinochem Group and ChemChina rose sharply after Reuters reported that the two firms are in discussions about a possible merger. Chinese data for September so far has been a mixed bag for investors, with markets retreating after disappointing export and import numbers on Thursday, but drawing some comfort from pickups in producer and consumer prices reported on Friday.