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Asian stocks skittish as rate-cut hopes wane, China plumbs 5-year lows

Published 01/17/2024, 10:08 PM
Updated 01/17/2024, 10:08 PM
© Reuters. Most Asian stocks kept to a tight range on Thursday as strong U.S. data further dented bets on early interest rate cuts by the Federal Reserve, while a rout in Chinese shares worsened in the wake of disappointing GDP readings.

Regional markets took a weak lead-in from Wall Street after stronger-than-expected retail sales data saw traders further trim bets on a March rate cut.

The data lent further credence to comments from Fed officials that U.S. rates will remain higher for longer, amid relative resilience in the economy. Such a scenario bodes poorly for risk-driven markets, and is likely to limit foreign capital inflows to Asian stocks in the near-term.

Most Asian markets were also reeling from a steep sell-off on Wednesday, following weaker-than-expected growth data from the region’s biggest economy.

Chinese stocks at multi-year lows following weak GDP

China’s Shanghai Shenzhen CSI 300 sank 0.8% on Thursday and was at its weakest level in nearly five years, while the Shanghai Composite slid 1.3% to a near four-year low. Losses in mainland stocks kept Hong Kong’s Hang Seng index trading at its worst level since late-2022.

Thursday’s losses marked a worsening rout in Chinese markets after data in the prior session showed Asia’s largest economy grew less than expected in the fourth quarter.

GDP barely edged past the government’s annual 5% target, with a bulk of the growth coming only from a lower base for comparison from 2022. The readings indicated sustained weakness in the Chinese economy after a post-COVID rebound largely failed to materialize in 2023.

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Chinese stocks remained in free-fall though most of 2023, and were the worst performers in Asia for the year. This trend showed little signs of improving in recent sessions, with Beijing’s reluctance towards unlocking more stimulus further denting sentiment.

Broader Asian markets remained under pressure on Thursday. South Korea’s KOSPI rose 0.6% after sinking to an over two-month low this week, while Australia’s ASX 200 fell 0.4% after data showed an unexpected decline in the country’s labor force.

Japanese markets were among the few outliers, with the Nikkei 225 and TOPIX rising about 0.5% and 0.2%, respectively. Both indexes were nursing two straight days of losses after racing to 34-year highs earlier in the week.

Japanese consumer inflation is due on Friday, and is expected to show a sustained decline in inflation, which gives the Bank of Japan little impetus to begin tightening its ultra-dovish policy.

Futures for India’s Nifty 50 index pointed to a weak open, after the index slumped over 2% on Wednesday amid rampant profit-taking. The Nifty had surged to a record high of over 22,000 points at the beginning of the week.

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Latest comments

I think stock market reacting like this is a sign of health as opposed to the western markets where its propped up despite any form of news. Stock market is meant to move in boom and bust and so on. Chinese are still working hard. Their universities are topping top ten. There is no such thing as growth in nature organically.
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Monetary stimulus brings nothing to the real economy, the Chinese know that.
Japan too. The Fed wants to emulate their QE too. Imagine 30 years of stagnation in America.
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