Asia-Pacific stocks retreated on Thursday after weak retail sales in China offset better than expected economic growth figures for the second quarter.
China’s gross domestic product grew 3.2 per cent in the three months to the end of June compared to the same period last year, as the country showed signs of recovery following the coronavirus lockdown. The data came in above the 2.5 per cent forecast by economists in a Reuters poll.
However, retail sales in the world’s second-biggest economy fell 1.8 per cent year on year in June, notching a fifth month of declines and bucking expectations of 0.3 per cent growth. Retail sales fell 20.5 per cent in February as the country was locked down.
Fixed asset investment was down 3.1 per cent, in line with forecasts, and industrial production rose 4.8 per cent.
The CSI 300 index of Shanghai- and Shenzhen-listed stocks was down 1.6 per cent at the lunch break and Hong Kong's Hang Seng index shed 1.1 per cent.
In Japan, the Topix declined 0.3 per cent and Australia's S&P/ASX 200 edged down 0.8, while the Kospi in South Korea shed 0.7 per cent. S&P 500 futures were down 0.6 per cent.
Marcella Chow, global market strategist at JPMorgan Asset Management, noted the lag for retail sales. But she expected the sector would become a growth driver alongside government infrastructure investment.
“Since domestic households have accumulated a huge amount of bank deposits for precautionary savings during the economic slowdown and pandemic, fast recovery might be seen in consumption when their confidence improves,” she said.
The onshore renminbi, which is permitted to move 2 per cent either side of a daily midpoint set by China's central bank, was 0.1 per cent weaker at Rmb6.9933 to the US dollar. The offshore renminbi was 0.2 per cent weaker at Rmb6.9951.
US-China tensions over a draconian national security law imposed on Hong Kong also weighed on sentiment.
Positive news from two vaccine trials supported global stocks overnight with the S&P 500 ending 0.9 per cent higher in the US and the FTSE 100 adding 1.8 per cent.
Elsewhere in Asia, the Bank of Korea opted to hold rates on Thursday, and revised down its GDP forecast to a 0.2 per cent contraction in 2020 on the back of weak exports and domestic demand due to the pandemic.
Alex Holmes, Asia economist for Capital Economics, said there was “a clear need for further stimulus” in the country. “Despite having mostly contained the virus at home without the need for a damaging lockdown, a sharp fall in exports is weighing heavily on the economy,” he said.
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July 16, 2020 at 11:10AM
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Asia stocks fall as China consumption remains weak - Financial Times
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