July 10, 2019 / 7:37 AM / 2 months ago

China shares fall as June producer prices fuel growth, deflation fears

* SSEC -0.44%; CSI300 -0.17%

* China producer price index flatlines in June

* New STAR Market IPOs divert market funds

SHANGHAI, July 10 (Reuters) - Chinese shares fell on Wednesday as flat producer price inflation fuelled concerns about domestic growth, and a flood of initial public offerings targeting Shanghai’s new tech board diverted funds from the rest of the market. ** At the close, the Shanghai Composite index was down 0.44% at 2,915.30. ** The blue-chip CSI300 index was down 0.17%, with its financial sector sub-index lower by 0.28%, the consumer staples sector up 0.35%, the real estate index down 0.7% and the healthcare sub-index up 0.53%. ** China’s producer prices flatlined in June on lower oil prices and weak global demand, fuelling concerns that a slowdown in manufacturing from a bruising trade war will further drag on growth in the world’s second-biggest economy.

** U.S. and Chinese trade officials held a “constructive” phone conversation on Tuesday, White House economic adviser Larry Kudlow said, marking a new round of talks after the world’s two largest economies agreed to a truce in a year-long trade war. ** In U.S.-China talks, “uncertainty over trade and the economy could persist, and the outcome of the negotiations may improve or worsen in stages. As many uncertainties could arise during trade talks, the domestic market’s medium-term focus will likely be on companies’ profitability and the magnitude of policy easing,” analysts at UBS Securities said in a note. ** “Given the macro slowdown, earnings expectations may decline. Investors may continue to prefer leading companies with resilient profit growth, a rare feature in the current macro environment. We expect policy support to continue, including a possible 100bp RRR cut to maintain ample liquidity,” they wrote. ** Meanwhile, nine Chinese companies, among the first to float on China’s red-hot Nasdaq-style tech board, are taking subscriptions from investors on Wednesday, diverting funds from the rest of the market. ** The busy week of IPOs comes after an official announcement that the first batch of 25 companies will start trading on Shanghai’s tech-heavy STAR Market on July 22. This week alone, 21 of them are taking subscriptions from investors. ** The smaller Shenzhen index ended down 0.46% and the start-up board ChiNext Composite index was weaker by 0.485%. ** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.31%, while Japan’s Nikkei index closed down 0.15%. ** At 07:17 GMT, the yuan was quoted at 6.8838 per U.S. dollar, 0.06% firmer than the previous close of 6.888. ** The largest percentage gainers in the main Shanghai Composite index were Jiangsu Chengxing Phosph-Chemical Co Ltd, up 10.12%, followed by Solareast Holdings Co Ltd, gaining 10.05%, and Fujian Start Group Co Ltd, up by 10.04%. ** The largest percentage losers in the Shanghai index were Guangzhou Yuetai Group Co Ltd, down 10.07%, followed by Harbin High-Tech Group Co Ltd, losing 10%, and Fujian Longxi Bearing Group Co Ltd, down by 10%. ** So far this year, the Shanghai stock index is up 16.9% and the CSI300 has risen 25.8%, while China’s H-share index listed in Hong Kong is up 5.6%. Shanghai stocks have declined 2.13% this month. (Reporting by Andrew Galbraith; Editing by Subhranshu Sahu)

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