Hong Kong’s Hang Seng index slipped by more than 0.40% on Thursday morning as the expansion of the Chinese service sector recorded a slowdown. Mainland Chinese stocks, the Shanghai Composite and Shenzhen Component, fell by 0.02% and 0.31% respectively. Other Asian-Pacific indices like Japan’s Nikkei 225 and Australia’s ASX 200 edged higher earlier in the day.
Hang Seng Index Concerns
According to data released by the National Bureau of Statistics on Thursday morning, there was a hiccup in the Chinese service sector’s expansion. The Caixin Service Purchasing Managers’ Index (PMI) for May was at 55.1. This was lower than the previous month’s PMI which came in at 56.3.
Its non-manufacturing PMI was at 55.2. The Caixin China Composite PMI came in at 53.8 in May which was a decline from April’s 54.7. However, the PMI was above 50 which separates expansion from contraction.
The slowdown in the Chinese service sector, was brought about by weaker demand for goods overseas and increased costs which heavily weighed on most businesses. The rise in Corona virus cases abroad saw the country’s benchmark of export orders dive into contraction.
Inflation pressures saw input cost rise at a faster rate in May. The cost for raw materials, transport, energy, and staff increased rapidly. Despite the increase in selling prices, it is unlikely that most companies will catch up with the increase in input costs.
However, there has been a slight improvement in consumption which has stimulated activity in China’s services sector. Manufacturing industries are slowly recovering from the Coronavirus pandemic. According to the Caixin survey, service firms increased their employing rates for three consecutive months even though at a slower rate.
Tension between China and the United States is hovering in the markets. US President Joe Biden is expected to sign an amended order later in the week that bans US investment in some companies. The companies to be banned are connected to China’s defense and surveillance technology sectors.
On Wednesday, the Fed President, Patrick Harker, said that it was important for the Fed to discuss the timeline for tightening its bond assets. Investors are still concerned about the US inflation and measures to be taken regarding the matter. However, some Fed officials have reiterated the price pressure will be temporary and that recovering businesses will still be supported.
Economic investors are eagerly awaiting US non-farm payrolls data for May to further evaluate the economic recovery and inflation risks.
Hang Seng Movers
AAC Technologies is the best performer in the Hang Seng index. AAC Technologies, a manufacturer of miniaturized acoustic components, led the gains in the index with a 5.73% increase. Citic Pacific, Xiaomi and Henderson Land, were also among the top performers in the Hang Seng index.
HKEX, a stock exchange firm, was the worst performer in the index in early trading. It slipped by more than 2.48%. CK Infrastructure, Alibaba and Tencent Holdings also fell by 2.47%,2.20% and 2.47% respectively.