Challenges in China's Economy as Property Sector Struggles

Mainland China stocks fell on Monday due to weak data, especially in the property sector, despite Hong Kong shares rising. China's central bank kept policy rate unchanged and drained funds from banks. Industrial output lagged, and new home prices fell rapidly. Some indices rose, but overall market showed mixed performance.

Mainland China stocks fell on Monday, hurt by a flurry of weaker-than-expected data that showed the property sector remains a key drag on the economy, while Hong Kong shares edged up. Meanwhile, China's central bank left a key policy rate unchanged, as expected, when rolling over maturing medium-term loans, and drained some funds from the banking system.

** China's May industrial output lagged expectations and a crisis in the property sector showed no signs of easing, adding pressure on Beijing to shore up growth, though retail sales beat forecasts thanks to a holiday boost. ** China's new home prices fell at the fastest pace in more than 9-1/2 years in May, official data showed on Monday, with the property sector struggling to find a bottom despite government efforts to rein in oversupply and support debt-laden developers.

** Data on Friday showed new bank lending in China rebounded far less than expected in May and some key money gauges hit record lows, suggesting the world's second-largest economy is still struggling for footing. ** At the midday break, the Shanghai Composite index was down 0.51% at 3,017.12 points.

** China's blue-chip CSI300 index was down 0.2%, with the real estate sector leading the losses. A sub-index tracking the industry was down 2.69% by the midday break. ** Chinese H-shares listed in Hong Kong rose 0.25% to 6,390.47 points, while the Hang Seng Index was up 0.2% at 17,978.30 points.

** The smaller Shenzhen index was up 0.12%, the start-up board ChiNext Composite index was higher by 0.8% and Shanghai's tech-focused STAR50 index was up 0.47%. ** Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.08% while Japan's Nikkei index was down 2.12%.

** The yuan was quoted at 7.2556 per U.S. dollar, 0% firmer than the previous close of 7.2557.