October 16, 2017 / 5:15 AM / a month ago

China stocks flat after robust growth outlook; Hong Kong gains

* SSEC -0.1 pct; CSI300 +0.2 pct, HSI +0.9 pct

* Robust China inflation, lending data fully priced in-analysts

* Investors expect “moderate” China slowdown in the next 6 months

SHANGHAI, Oct 16 (Reuters) - China stocks were flat on Monday in muted response to the central bank’s surprisingly strong second-half growth outlook just days ahead of the Communist Party Congress.

Central bank governor Zhou Xiaochuan said the economy was expected to grow 7 percent in the second half of this year, accelerating from the first six months and defying widespread expectations for a slowdown.

His growth forecast followed robust lending and inflation data for September that already countered expectations of gradual cooling in the economy in the latter part of the year.

The CSI300 index rose 0.2 percent, to 3,927.51 points at the end of the morning session, while the Shanghai Composite Index lost 0.1 percent, to 3,386.78 points.

The market continues its recent pattern of narrow range-bound trading ahead of the start of the 19th Party Congress on Wednesday, where President Xi Jinping is set to amass even greater power.

China’s securities regulator, which has repeatedly vowed to maintain market stability during the politically sensitive event, on Friday warned major shareholders of listed companies against “share dumping”.

Chen Xiaopeng, Shenzhen-based strategist at Sealand Securities, said the market would likely remain highly stable in the near term, but cautioned against the looming risk of economic slowdown next year.

“There’s limited room for stocks to fall due to the congress, and there’s not much catalyst on the upside either,” Chen said.

He warned of the risk of liquidity tightening, and economic slowdown next year, arguing that encouraging economic data released recently had been fully priced in.

Indeed, there was little excitement after data showed China’s producer price inflation (PPI) unexpectedly accelerated to a six-month high in September, and Chinese banks extended more loans than expected last month.

“Based on our interactions with investors, we think the general market outlook is for a ‘modest’ economic slowdown in the next six months,” UBS Securities China strategist Gao Ting wrote on Monday.

Gao identified several sources of concerns, including higher interest rates due to supervisory tightening, a continuing slowdown in the housing market, and forceful planned production curbs over the coming winter in areas surrounding Beijing.

Sector performance was mixed.

Banking stocks posted strong gains, but resources and property shares fell.

In Hong Kong, shares posted robust gains as Asian shares advanced to new highs following Wall Street’s lead.

Both the Hang Seng index and the Hong Kong China Enterprises Index added 0.9 percent, to 28,717.62 points and 11,623.37 points, respectively.

Reporting by Samuel Shen and John Ruwitch; Editing by Jacqueline Wong

Our Standards:The Thomson Reuters Trust Principles.
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