Asian shares mostly fell on Thursday as markets tracked Wall Street’s losses and concerns about China’s economic outlook intensified.
China and Hong Kong stocks closed lower, hit by increasingly grim growth prospects for the world’s second-largest economy, which has been wracked by Covid-19 outbreaks, a prolonged property crisis, and now a record heatwave.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.5%, after US stocks ended the previous session with mild losses. The index is up 1.3% so far this month.
China’s blue-chip CSI300 Index dropped 0.9%, while the Shanghai Composite Index lost 0.5%. Hong Kong’s Hang Seng benchmark fell 0.8%.
Nomura lowered its China economic growth forecast, citing dismal July activity data, the lingering impact from the pandemic, and the worst heatwave in six decades.
“(The) policy response might be too little, too late and too inefficient,” said Nomura, which slashed China’s growth forecast to 2.9% for the third quarter, from 4%. Its 2023 GDP forecast was also lowered, to 5.1%, from 5.5%, and Nomura expects “a new round of cuts” in coming weeks by other brokerages.
“Virus outbreaks are happening with increasing frequency. The housing market remains in a downward spiral. And exports look set to drop back before long,” wrote Julian Evans-Pritchard, senior China Economist at Capital Economics.
“More support is on its way but it will probably be too late too little to prevent output from stagnating this year.”
China’s central bank also faces limited room to manoeuvre due to worries over rising inflation and capital flight, policy insiders and analysts said.
Japanese stocks fell alongside Asian peers, as investors reviewed the US Federal Reserve meeting minutes and await an upcoming symposium to assess whether the central bank would temper its aggressive policy.
Japan’s Nikkei share average shed 0.9% at the open and stayed around that level throughout the day, ending down nearly 1% at 28,942.14.
The losses erased most of the gains from the previous day, when the Nikkei closed above 29,000 for the first time since January. The index is still up around 4% for the week.
The broader Topix index also fell, losing 0.82%.
“If US stocks bounce back, we’re expecting the Nikkei to trend upwards too,” Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, said.
“We’re hearing that a lot of people are awaiting [Fed chairman Jerome] Powell’s appearance at next week’s Jackson Hole symposium, so the sentiment may well be wait-and-see until then,” another market participant at a domestic securities firm said.
Australian shares also closed lower, tracking weakness in global equities, while mixed signals from local jobs data also dented investors’ sentiment. The S&P/ASX 200 index ended 0.2% lower at 7,112.80.
“To a degree, the ASX has been caught up in the bearish sentiment seen across equities since yesterday’s FOMC minutes, and today’s unexpected employment growth contraction has also weighed on the local benchmark,” Matt Simpson, a senior market analyst at City Index, said.
Figures from the Australian Bureau of Statistics showed the jobless rate dipped to 3.4% in July, the lowest rate since August 1974. The net employment also surprised by falling 40,900 in July, missing forecasts of a 25,000 increase.
“A decline in the number of employed people, following record highs, along with record number of vacancies, suggests labour market is tight. Reflecting this, wages are rising and we expect the RBA (Reserve Bank of Australia) to continue to hike,” analysts at Barclays said in a note. It said the RBA could return to 25 basis point increments in September.
Reflecting the mixed mood, Wall Street futures dipped while European futures rose in Asian afternoon trade.
Asian Central Banks Also Weighing Hikes
In Asia, ongoing geopolitical worries continue to dampen sentiment in the region, especially mainland Chinese equities.
“There is a combination of concerns in China that are adding weight and creating a sea of red across the boards,” said Kerry Craig, JPMorgan Asset Management strategist.
“In the Asian region, central banks are not done with rate hikes and that is weighing on markets too.”
Indian Shares Edge Up
Meanwhile, Indian shares closed marginally in a volatile session with gains held in check by weakened global markets after central bankers suggested that the inflation outlook was not improving.
The NSE Nifty 50 index closed 0.07% higher at 17,956.5 while the S&P BSE Sensex was up 0.06% at 60,298.
Pharma and IT stocks weighed over sentiment, but losses were offset by gains in banking and realty stocks.
US crude rose 1.3% to $89.20 a barrel as strong US fuel consumption data and expected falls in Russian supply this year trumped concerns about slowing demand. Brent crude gained 1.5% to $98.04 per barrel.
Spot gold inched up 0.46% to $1,769 per ounce.
- Reuters with additional editing by Jim Pollard