China’s blue-chip index was on course to break a five-week rising streak, while Hong Kong’s share benchmark was poised to post its biggest weekly loss in three months, as rising US interest rates stoked fears of capital outflows from the region. China’s weak producer inflation and investment data also dented sentiment this week as it reinforced concerns of a renewed slowdown in the world’s second-biggest economy. China’s blue-chip CSI300 index fell 0.2 percent, to 3,522.03 points by the lunch break, declining 1.5 percent for the week – the first weekly decline since early May. The Shanghai Composite Index lost 0.3 percent, to 3,124.42 points.
The Hang Seng index added 0.4 percent to 25,677.88 points but is on track for a 1.4 percent weekly loss, the biggest since early March. The Hong Kong China Enterprises Index, which fell sharply on Thursday, rebounded 0.5 percent, to 10,400.93. The rally in China’s blue-chips which have far outperformed small-caps this year, appear to be losing steam amid signs of monetary tightening and renewed economic weakness. Yu Gang, analyst at Zhongtai Securities, said that upside potential for mainland shares is limited, as liquidity remains tight while borrowing costs rise.
In a sign that China’s central bank intends to stabilize market sentiment, the People’s Bank of China (PBOC) injected a net 410 billion yuan ($60.17 billion) into money markets this week, the biggest weekly injection since mid-January. Most sectors in China fell, with property and consumer shares leading the decline. In Hong Kong, many of the sectors rebounded on Friday after the sharp falls the previous session.