China Stocks Subdued Amid Weak Inflation, Deflation Risks Linger

China stocks remained subdued as consumer inflation missed expectations, and producer price deflation persisted. Despite government support measures, domestic demand remains weak. Conversely, Hong Kong shares followed broader Asian market trends higher amid growing expectations of imminent U.S. rate cuts and a potential Fed easing cycle.

China stocks were subdued on Wednesday, reflecting the nation's consumer inflation falling short of expectations and ongoing producer price deflation. Government support measures have initiated a bumpy recovery for the world's second-largest economy, but the risk of deflation remains, with domestic demand still weak, Zhiwei Zhang, chief economist at Pinpoint Asset Management, noted.

Despite the overall subdued performance, Chinese H-shares listed in Hong Kong and the Hang Seng Index gained, influenced by broader Asian market trends and growing anticipation of U.S. rate cuts. The Shanghai Composite index fell by 0.33%, reflecting local economic challenges amid inflation data misses.

The poll-based forecast shows new yuan loans likely more than doubling in June from May, indicating continued policy support from the central bank. The diverse sectoral performance saw minor gains in certain indices like the financial and consumer staples sectors, while real estate fell.

(With inputs from agencies.)