Mixed Trade Data Impacts Chinese Stocks Amid Regional Market Weakness

On Friday, China's stocks declined along with broader Asian markets due to mixed trade data and overnight Wall Street losses, while Hong Kong shares rose. June's export growth surpassed expectations, but imports fell, hinting at manufacturers' anticipatory orders due to impending tariffs. Analysts highlight weak domestic demand and strong export reliance as risks for China's economy.

China stocks fell on Friday in line with a broader weakness across other Asian markets, with mixed trade data weighing on sentiment and tracking overnight losses on Wall Street, while Hong Kong shares rose. China's exports rose 8.6% in June from a year earlier, stronger than the expected 8.0% growth, while imports unexpectedly shrank 2.3%, customs data showed on Friday, suggesting manufacturers are front-loading orders in anticipation of tariffs from a growing number of trade partners.

‘This reflects the economic condition in China, with weak domestic demand and strong production capacity relying on exports,’ said Zhiwei Zhang, chief economist at Pinpoint Asset Management. ‘The sustainability of strong exports is a major risk for China's economy in the second half of the year. The economy in the US is weakening. Trade conflicts are getting worse.’

Around the region, MSCI's Asia ex-Japan stock index was down 0.17% while Japan's Nikkei index was down 2.28%, tracking Wall Street losses overnight, after investors rotated into smaller companies following the cooler-than-expected U.S. inflation print. At the midday break, the Shanghai Composite index was down 0.21% at 2,964.25.

China's blue-chip CSI300 index was down 0.2%, with its financial sector sub-index higher by 1.12%, the consumer staples sector down 0.41%, the real estate index up 4.42% and the healthcare sub-index down 0.2%. Chinese H-shares listed in Hong Kong rose 1.92% to 6,494.18, while the Hang Seng Index was up 1.98% at 18,185.53.

The smaller Shenzhen index was down 0.35%, the start-up board ChiNext Composite index inched 0.08% lower and Shanghai's tech-focused STAR50 index was down 0.54%.