Hang Seng Index and Mainland China Equities Slide on Stimulus Silence

US Equities Recover Ahead of the US CPI Report

On Tuesday, October 7, US Equity Markets recovered their losses from the previous session. Investors turned their attention to the upcoming US CPI Report. Hopes for a softer inflation print supported expectations of a more dovish Fed rate path. These factors drove buyer demand for riskier assets.

Tech stocks led the rally, with the Nasdaq Composite Index rising 1.45%. The Dow and the S&P 500 advanced by 0.30% and 0.97%, respectively.

RCM/TIPP Index Supports Fed Rate Cut Bets

On Tuesday, the RCM/TIPP Economic Optimism Index increased modestly from 46.1 in September to 46.9 in October. Despite the increase, the numbers are unlikely to give the Fed concerns about a possible surge in consumer spending. Upward trends in consumer spending could fuel demand-driven inflation, potentially delaying a Fed rate cut.

According to the CME FedWatch Tool, the chances of a 25-basis point Fed rate cut increased from 84.4% on Monday to 88.8% on Tuesday.

Experts Weigh in on the Fed’s Potential Rate Path

Arch Capital Global Chief Economist Parker Ross commented on the US economy and Fed rate path, stating,

“Key Takeaway: Sept. job growth of 254k was much stronger than expected and reinvigorated a plausible path to a soft landing. Macro Implications: Slowdown concerns have been quelled, bringing market pricing into alignment with our expectation for a 25bps rate cut in Nov.”

Investors Clamor for More Stimulus from Beijing

While expectations of a Fed rate cut buoyed the US markets, the HK and Chinese markets faced challenges. On Tuesday, the highly anticipated National Development and Reform Commission (NDRC) press conference disappointed investors. There were no fresh policy measures to boost demand for riskier assets.

The Kobeissi Letter commented on the press conference and market sentiment, stating,

“This came as China attempted to end FIVE straight quarters of deflation, the longest streak since 1999. Deflation is lethal because it freezes the economy. If you know prices are going down tomorrow, then why would you buy something today? It’s the opposite of inflation.”

The negative sentiment toward the lack of further stimulus impacted the HK and Mainland China markets.

Hang Seng Index and Mainland China Equities Slide

In Asia, the Hang Seng Index fell by 1.25% on Wednesday morning. While both real estate and tech stocks trended lower, real estate faced sharper declines.

The Hang Seng Mainland Properties Index (HMPI) slid by 3.97%, while the Hang Seng Tech Index (HSTECH) declined by 0.95%. Notable real estate stock movers included Shimao Group Holdings Ltd (0813), which fell by 3.70%, while Longfor Group Holdings Ltd. (0960) slid by 5.72%.

Mainland China’s CSI 300 and Shanghai SEC Composite tumbled by 4.88% and 4.39%, respectively.

Nikkei Index Advances on Tech Stock and Yen Trends

Meanwhile, the Nikkei 225 advanced by 0.61% on Wednesday morning, as the USD/JPY pair held onto the 148 level. The softer Japanese Yen continued driving buyer demand for Nikkei 225-listed export stocks.

Overnight US tech sector gains also contributed, with Tokyo Electron (8035) gaining 1.49%, while Softbank Group Corp. (9984) rose by 0.94%.

ASX 200 Advances on Bank and Tech Sector Gains

On Wednesday, the ASX 200 Index gained 0.12% in the morning session. Banking and tech stocks offset losses across gold, mining, and oil stocks. The S&P/ASX All Technology Index rallied by 1.68%.

Rising bets on a 25-basis point Fed rate cut drove demand for high-yielding Aussie bank stocks. Commonwealth Bank of Australia (CBA) advanced by 0.81%, while Westpac Banking Corp. (WBC) rose by 0.53%.

However, iron ore prices tumbled 5.13% on Tuesday, impacting demand for mining stocks. Gold and oil also weakened, with WTI crude oil sliding below $74.

Looking Ahead

Investors should remain alert, focusing on the central banks and the Middle East. Closely monitor news wires, real-time data, and expert commentary to adjust your trading strategies accordingly. Stay updated with the latest news and analysis to effectively manage positions across the Asian equity markets.