Chinese shares fell Wednesday as traders weighed weak economic data from the Golden Week holiday and questioned Beijing’s commitment to more stimulus measures.
The benchmark CSI 300 Index underperformed the region, declining as much as 7.4% before paring some of its losses after authorities announced a briefing on Saturday about fiscal policy. US and European equity futures also slipped following a report that the US Justice Department was weighing a breakup of Google. Ten-year Treasury yields hovered around the key 4% mark and oil steadied after tumbling the most in more than a year.
Concerns in China have mounted that the latest burst of stimulus may be insufficient to convince investors of a sustainable rally in the equity market. Chinese tourists shelled out less money during their long holiday while a news report indicated the nation needs to introduce policies to stabilize growth and expectations. That’s a further sign Beijing is attempting to build confidence among investors.
“For the markets to sustain enthusiasm, far more aggressive gestures for the new fiscal package or market stabilization mechanism might be necessary,” said Homin Lee, senior macro strategist at Lombard Odier. “It’s possible that these gyrations persist until the National People’s Congress Standing Committee meeting and also the US election in early November.”
The National Development and Reform Commission, China’s economic planning agency, announced that a meagre 200 billion yuan ($28 billion) in spending would be advanced from next year after analysts estimated a fiscal package worth as much as 3 trillion yuan in the pipeline.
A growing number of strategists and fund managers have in recent days expressed scepticism about the rally, saying Beijing needs to back up its spending pledges with real money. Some are also concerned that many stocks have already reached overvalued levels.
“No further policies from the NDRC yesterday have disappointed the market,” said Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd. “Volatility is likely to continue into the fourth quarter, but liquidity will come back, wait for pullback to jump in, especially from those overseas institutions who have been very underweight greater China.”
In corporate news, Alimentation Couche-Tard Inc. sent Seven & I Holdings Co. a new potential acquisition price of ¥7 trillion ($47.2 billion), showing that the Canadian company is still seeking to enter takeover talks after its initial bid was rejected. The Japanese company’s shares surged as much as 12%.
Elsewhere in Asia, New Zealand’s dollar and bond yields fell after the nation’s central bank delivered a 50 basis-point cut on its benchmark rate, while the Reserve Bank of India left rates unchanged. The RBI changed its monetary policy to neutral, sending shares higher. South Korea will join FTSE Russell’s benchmark bond index, capping months of official campaigning and an overhaul of financial market infrastructure.
US Rate-Cut Expectations
Treasuries were little changed during Asian trading after a run of selling in the prior four sessions, amplified by last week’s US jobs data that weighed on rate-cut expectations. With inflation data due later in the week, investors were parsing comments from Federal Reserve officials.
Fed Bank of Boston President Susan Collins noted that rate cuts should be careful and data-based. Her Atlanta counterpart Raphael Bostic said while risks to inflation have come down, threats to the labour market have risen, though the economy is still strong. Governor Adriana Kugler said officials should keep the focus on bringing inflation to target, with a “balanced approach” that avoids a slowdown in jobs.
“The US data is not so strong that the Fed’s contribution to the global rate-cutting cycle looks set to end,” said Mark Haefele at UBS Global Wealth Management. “We therefore maintain our conviction for investors to position for lower rates.”
Source: https://finance.yahoo.com/news/asian-stocks-rise-tech-lifts-223209246.html
