Asian Stock Markets Mixed Ahead of China Inflation Data

On the 8th, a day before China's inflation data release, Asian stock markets showed mixed trends.

As of 1:45 AM Korea time, the Nikkei 225 index rose 0.23% from the previous session to 32,329.85, and the TOPIX index increased by 0.26% to 2,289.88. Australia's S&P/ASX 200 index also rose 0.13% to 7,318.70.

The Hong Kong Hang Seng Index fell 1.37%, while mainland China's Shanghai Composite Index and Shenzhen Composite Index showed slight declines of approximately 0.014% and 0.058%, respectively.

[Image source=AFP Yonhap News]

Investors' attention is focused on China's July Consumer Price Index (CPI) and Producer Price Index (PPI), which will be released on the 9th. According to Bloomberg's survey, unlike Western countries such as the United States struggling with high inflation, China's July CPI and PPI are expected to decrease by 0.4% and 4.0% year-on-year, respectively.

China's CPI inflation rate recorded negative figures in January and February 2021 but has remained positive since then. However, this year, after reaching 1.0% in February, it stayed below 1% from March to May and hit 0% in June.

The PPI inflation rate has been negative since October last year amid falling raw material prices. The June PPI fell 5.4% year-on-year, marking the steepest decline since December 2015 (-5.9%).

If both CPI and PPI inflation rates come out negative, it will be the first time since November 2020. Bloomberg's forecast for China's inflation this year is 0.8%, the lowest since 2009, when the global financial crisis aftermath was ongoing.

Some expect China's CPI inflation rate to decline further for a few more months and then rise again as the base effect disappears and demand recovers toward the end of the year.

Moreover, according to Bloomberg Economics, based on another inflation indicator, the GDP deflator, China's economy has already entered deflation (-0.62%) in the first half of this year.

Bloomberg assessed that while the negative CPI inflation rates at the end of 2020 and early 2021 were due to falling pork prices, the current situation is more concerning because export prices are falling due to reduced exports to the US and Europe, and rental, furniture, and home appliance prices are also declining amid a slowdown in the real estate market.