Chinese indexes drop at least 2% after data shows China producer inflation surging

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SINGAPORE — Chinese stocks led losses in Asia-Pacific markets on Monday morning as investors reacted to China’s inflation data for March.

The Shanghai composite was down about 2% while the Shenzhen component tumbled around 3%.

Hong Kong’s Hang Seng index dropped 2.4%. Hong Kong-listed shares of Chinese electric vehicle maker Nio plunged more than 8% after the firm announced a suspension in production due to disruptions at its supply chain partners as a result of Covid.

The more notable fact is the big gap between [China’s consumer price index] and [producer price index], and that indicates that pricing power amongst most companies in China is weak and they’re taking a hit on margins.
Ramiz Chelat
Portfolio manager, Vontobel Asset Management

China’s producer inflation for March was higher than expected. The producer price index surged 8.3% as compared with a year ago, official data showed Monday, above expectations for a 7.9% increase in a Reuters poll.

Chinese consumer inflation also rose more than expected in March, with the consumer price index climbing 1.5% year-on-year. That was above expectations in a Reuters poll for a 1.2% increase.

The data release comes as mainland China is fighting to control its worst wave of Covid since the beginning of the pandemic in early 2020.

“I think the more notable fact is the big gap between CPI and PPI, and that indicates that pricing power amongst most companies in China is weak and they’re taking a hit on margins,” Ramiz Chelat, portfolio manager at Vontobel Asset Management, told CNBC’s “Street Signs Asia” on Monday.

“Given the infectiousness of omicron, we could see more localized lockdowns being a recurring theme,” he said. “We think you need to be very selective in China, look for companies that can deliver in a growth-challenged environment.”

Elsewhere, the Nikkei 225 in Japan slipped 0.71% while the Topix index shed 0.61%. South Korea’s Kospi dipped 0.55%.

Australia’s S&P/ASX 200 bucked the overall trend regionally as it climbed slightly.

Over in Southeast Asia, shares of tech firm GoTo soared more than 15% from their issue price as they made their debut in Indonesia. The broader Jakarta Composite also gained 1.15%.

MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.36% lower.

Oil falls more than 2%

Oil prices were lower in the morning of Asia trading hours, with international benchmark Brent crude futures down 2.34% to $100.38 per barrel. U.S. crude futures shed 2.4% to $95.90 per barrel.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 99.934 after recently crossing the 100 level.

The Japanese yen traded at 124.93 per dollar, weaker as compared to levels below 123.2 seen against the greenback last week. The Australian dollar was at $0.7422 following last week’s drop from above $0.763.

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