Hang Seng and ASX 200: Markets Mixed Amid US Economy Jitters, China Optimism

US Markets Slide Amid Economy Jitters

US equity markets faced heavy losses on Friday, February 21, after US Services PMI data spooked investors. The Nasdaq Composite Index slid by 2.20%, while the Dow and the S&P 500 fell 1.69% and 1.71%, respectively.

US tariff uncertainties compounded investor concerns as President Trump considers sweeping import duties on autos, chips, and pharma. Tariffs could drive US import prices higher, potentially forcing the Fed into a higher-for-longer rate path. Tariff-driven inflation, a more hawkish Fed stance, and a slowing US economy could adversely impact risk sentiment.

US Services Sector Contracts

On February 21, the US services sector took center stage. The S&P Global Services PMI unexpectedly dropped from 52.7 in January to 49.7 in February, signaling a sector contraction. Accounting for around 80% of US GDP, February’s data heightened fears of a sharp economic slowdown, triggering a flight to safety.

S&P Global Market Intelligence Chief Business Economist Chris Williamson emphasized the significance of the February survey, stating:

“Whereas the survey was indicating robust economic growth in excess of 2% late last year, the February survey signals a faltering of annualised GDP growth to just 0.6%.”

US Banks Turn Bullish on China Stocks

Despite ongoing uncertainty about a full-blown US-China trade war, US banks are bullish on Mainland China’s equity markets.

On Monday, February 24, CN Wire reported:

“Goldman Sachs remains overweight on China’s A shares and H shares. Developments in artificial intelligence will continue benefiting H shares from the fundamental and liquidity perspectives, the analysts say, and see room for A shares to catch up and narrow the return gap with H shares. H shares could continue being favored as global funds raise their allocation in China, they add.”

Goldman Sachs joined Morgan Stanley in expressing a positive market outlook. Bloomberg TV Chief Markets Editor David Ingles commented:

“Note MS has generally been more cautious, measured on China among Wall Street names. The fact that they’ve changed their view means something. Bank’s exited its underweight China call and are now bullish, WITHOUT a substantial change in either macro and geopolitical assumptions (those would be a bonus).”

China’s focus on domestic consumption, an ongoing transition toward a consumption-driven economy, and AI advancements have spotlit China’s markets.

Hang Seng Index Edges Higher on Stimulus Hopes

In the Asian markets, the Hang Seng Index edged 0.02% higher on Monday morning. Risk sentiment waned following Wall Street’s Friday sell-off. However, reports of dialogue between China’s Vice Premier and the US Treasury Secretary on February 21 raised hopes of avoiding a full-blown trade war. Expectations of Beijing introducing stimulus targeting domestic consumption also supported market sentiment.

Significantly, the Hong Kong Mainland Property Index soared 3.69%, offsetting a mixed tech sector session. Notable movers included Baidu (9888), advancing 1.51%, while Tencent (0700) and Alibaba (9988) saw losses of 2.04% and 0.65%, respectively.

Mainland China’s equity markets were relatively stable as investors eye stimulus-related news and tariff developments. The CSI 300 and the Shanghai Composite Index slipped by 0.05% and 0.03%, respectively.

ASX 200 Steadies After 5-Day Losing Streak

Australia’s ASX 200 Index saw a modest 0.04% increase on Monday morning, potentially ending a five-day losing streak. Banking stocks provided crucial support amid broader market weakness.

Commonwealth Bank of Australia advanced by 1.99%, with ANZ (ANZ) gaining 1.88%. Falling US Treasury yields drove demand for high-yielding banking stocks. Monday’s rally comes after heavy losses following last week’s RBA’s rate cut and disappointing earnings reports.

In contrast, the S&P/ASX All Technology Index tracked Friday’s US tech stock sell-off, sliding 3.38%.

Nikkei Futures Tumble

Japan’s Nikkei 225 futures fell by 530 points on Monday morning, mirroring Wall Street’s losses from Friday. The USD/JPY pair dropped 0.06% to 149.140 in the morning session, extending last week’s 2.01% slide, further dampening sentiment. The stronger Yen could adversely impact earnings for export-oriented Japanese companies.

Japan’s stock markets were closed for the Emperor’s birthday.

Outlook: Key Risks and Opportunities

Looking ahead, corporate earnings, central bank policy signals, and US tariff developments will remain pivotal factors influencing market trends.

While innovation and strategic partnerships in AI and technology sectors offer potential growth opportunities, persistent tariff uncertainties may continue fueling market volatility.

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