Asia’s major markets fell back on Thursday after Chinese authorities unveiled more plans to tighten regulation across multiple sectors over the coming years.
The weak showing came despite a record lead from Wall Street, where traders responded to US figures showing a drop in inflation, easing pressure on the Federal Reserve to start winding down its ultra-loose monetary policy soon.
Stocks had enjoyed a largely positive start to the week after a recent run of pressure caused by concerns over the fast-spreading Delta variant, as well as traders taking a breather after a long-running rally.
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China’s crackdowns have also had a negative impact and now the country’s State Council has signalled more regulation will be rolled out across other parts of the economy over the next five years.
A statement released jointly by the council and the Communist Party’s Central Committee said sectors including private tutoring, and food and drugs, would see tougher legal enforcement.
Ken Cheung Kin Tai, an analyst at Japan’s Mizuho Bank, said in a research note that “foreign investors will continue to reassess the outlook for Chinese investments under tighter regulations”.
Hong Kong, Shanghai, Tokyo, Seoul, Wellington, Taipei and Manila all fell though there were gains in Sydney, Singapore, Mumbai and Jakarta.
OLYMPICS BOOST
The Hang Seng Index fell 0.53%, or 142.34 points, to 26,517.82. The Shanghai Composite Index fell 0.22%, or 7.88 points, to 3,524.74, while the Shenzhen Composite Index on China’s second exchange eased 0.35%, or 8.66 points, to 2,478.34.
Tokyo’s Nikkei 225 index fell 0.20%, or 55.49 points, to 28,015.02, while the broader Topix index edged down 0.03%, or 0.53 points, to 1,953.55. E-commerce firm Rakuten plunged 6.40% to 1,257 yen after saying its net loss had swelled for the six months to June.
And advertising giant Dentsu, which was heavily involved in organising the Tokyo Olympics, surged 5.02% to 4,285 yen as it forecast a return to the black for the current fiscal year.
CORE INFLATION
The Dow and S&P 500 finished at all-time highs on Wednesday, buoyed by data showing that while consumer prices rose significantly for energy and food in July, core inflation – which strips out energy and food costs – came in at 0.3%, just a third of the rate in June.
But there was some caution on the significance of the monthly figures for the long-term outlook.
“There is a lot being read into the month over month numbers, but one month does not make a trend,” Jeanette Garretty, chief economist at Robertson Stephens Wealth Management, said.
KEY AREAS
San Francisco Fed chief Mary Daly lifted expectations for a move before 2022, telling the Financial Times she was “very optimistic and positive” about improvements in key areas.
“That for me means it’s appropriate to start discussing dialling back the level of accommodation that we’re giving the economy on a regular basis,” she said, adding: “Talking about potentially tapering those later this year or early next year is where I’m at.”
Investors are also awaiting a meeting of world central bankers and financial leaders later this month in Jackson Hole, Wyoming, where Fed boss Jerome Powell’s speech is likely to be the key focus with hopes he will provide fresh clues on policy.
MARKETS
Tokyo – Nikkei 225: DOWN 0.2% at 28,015.02 (close)
Hong Kong – Hang Seng Index: DOWN 0.9% at 26,428.90
Shanghai – Composite: DOWN 0.2% at 3,524.74 (close)
New York – Dow: UP 0.6% at 35,484.97 (close)
- AFP and Sean O’Meara
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