HK & China Equities Mixed, Off Morning Lows, China CPI Slows

Hong Kong and China equity markets have followed US Indices lower after stronger than expected US CPI overnight, although markets are off their morning lows. China Mainland equities are out-performing Hong Kong equities after the past few days of underperformance. Investors are now signaling the Federal Reserve will cut interest rates just twice this year, starting in September, less than the most recent Federal Reserve dot plot that indicated three 2024 cuts. At the start of the year, market pricing indicated six cuts were expected. Elsewhere, China Vanke has been downgraded to Junk, Fitch cut China's outlook to negative, China's market watchdog to crack down on fraudulent issuances while China CPI falls to 0.1% y/y in March.

• Hong Kong equities are lower today, the HSTech Index is down 1.30%, while the Mainland Property Index is off 1.15%, the HSI failed to break above March 3 highs and just shy of testing the 200-day EMA on Wednesday, and is now down 0.76% for the day. China equities are faring slightly better today, with the CSI300 unchanged, while the small cap CSI1000 is up 0.72% and the growth focused ChiNext is off 0.37%
• China Northbound flows were 4.1billion yuan on Wednesday, with the 5-day average at -2billion, while the 20-day average sits at 1.32billion yuan.
• In the property space, S&P Global Ratings downgraded China Vanke to junk status due to a cash crunch and investor scrutiny, with Moody's and Fitch also recently lowering its credit rating. Despite having enough liquidity to address this year's debt maturities, weakening property sales and margins threaten its competitiveness, and its longer-term financial position may deteriorate if planned asset sales falter. China Vanke Stocks and Bonds continued to decline after news emerged that a regional manager in Jinan is assisting in an investigation for "personal reasons," causing the stock to close at its lowest level since May 2014. This follows recent allegations of money laundering and tax evasion made against the company and its chairman.
• (Bloomberg) Fitch Cuts China Outlook to Negative on Steady Rise in Debt (See link)
• (Bloomberg) China Market Watchdog Vows to Crack Down on Fraudulent Issuances (see link)
• (Bloomberg) Chinese Cities Further Ease Home-Buying Policies, Newspaper Says (see link)
• Earlier, China's consumer prices saw slower growth in March, rising by 0.1% year-on-year, attributed to declines in food and travel costs, which widened deflation concerns after a brief respite in February. Despite an expected rise, food prices dropped by 2.7%, while non-food prices increased by 0.7%, with the core CPI slowing to 0.6% growth. Additionally, the producer-price index fell 2.8% year-on-year, in line with economist expectations, continuing an 18-month streak of deflation.
• Looking ahead, Trade Balance data is due out on Friday