Hang Seng Index Falls Despite China Data Boost – Asian Market Weekly Recap

US Equity Markets Extend Winning Streak

US equity markets advanced for the sixth consecutive week, with the Dow Index and the S&P 500 advancing by 0.96% and 0.85%, respectively in the week ending October 18. The Nasdaq Composite gained 0.80%.

Investor bets on 25-basis point November Fed rate cut and a soft US economic landing drove buyer appetite for riskier assets. According to the CME FedWatch Tool, the probability of a November Fed rate cut increased from 89.5% (October 11) to 90.4 (October 18).

US Consumer Spending, the Labor Market, and the Fed Rate Path

On Thursday, US retail sales and jobless claims data reinforced expectations for a soft US economic landing.

Retail sales increased by 0.5% in September after rising by 0.1% in August. The pickup in consumer spending signaled a resilient US economy as private consumption contributes over 60% to GDP.

Meanwhile, jobless claims dropped from 260k (week ending October 5) to 241k (week ending October 12). The claims data signaled strength in the US labor market, boosting sentiment toward the US economic outlook.

Corporate earnings also contributed, with Morgan Stanley (MS), Travelers Companies (TRV), and Netflix (NFLX) enjoying better-than-consensus earnings results.

China’s Economic Data and Stimulus Measures

In China, investors remained cautious on Monday as delayed trade figures raised concerns about the economy. Export growth slowed sharply, rising by 2.4% year-on-year in September compared to 8.7% in August.

However, economic data from China showed a pickup in domestic activity at the end of Q3 2024. The data drove demand for Hong Kong and Mainland China-listed stocks on Friday.

The Chinese economy grew by 4.6% year-on-year in Q3 2024, down from 4.7% in Q2 2024. While slower than Q2, September’s retail sales, unemployment, and industrial production figures signaled a pickup in economic activity at the end of Q3 2024. The upbeat data drove demand for riskier assets as investors awaited the next round of fiscal policy measures.

Tighter labor market conditions and the upswing in retail sales may ease calls for stimulus to boost domestic consumption. However, measures to boost consumption could push the Hang Seng Index and Mainland equity markets higher.

Expert Views on China

Natixis economist Alicia Garcia-Herrero commented on the recent economic data from China and fiscal stimulus, stating,

“Given that the stimulus only started to be announced on September 24th and rates were cut only later while we are still waiting for a fiscal stimulus, one wonders why is the data so positive. Does this mean that no fiscal stimulus is needed to reach 5% growth in 2024?. Then it is double as good news since the fiscal stimulus is not coming (at least on the consumption side)… Very timely data!!!”

Hang Seng Index and Mainland Chinese Equity Markets Diverge

In the week ending October 18, the Hang Seng Index extended its losses from the previous week, falling by 2.11%, despite Friday’s 3.61% rally.

Tech and real estate sector stocks dragged the Index into negative territory. The Hang Seng Tech Index (HSTECH) fell by 2.86% in the week ending October 18, while the Hang Seng Mainland Properties Index (HMPI) declined by 2.46%.

Major tech stocks ending the week in the red included Baidu (9888), which slid by 7.62%, while Alibaba (9988), declined by 5.01%.

From the real estate sector, Shimao Group Holdings Ltd. (0813) tumbled by 15.12%, while Agile Group Holdings Ltd. (3383) slumped by 16.22%.

On the Mainland, the CSI 300 advanced by 0.98%, while the Shanghai Composite ended the week up by 1.36%. Friday’s economic data from China and hopes for further stimulus measures fueled a rebound.

Commodity Markets: Iron Ore Spot and Gold

Concerns about the Chinese economy impacted iron ore spot prices, which tumbled by 5.02% in the week.

In contrast, gold gained 2.41%, reaching a record high of $2,723. Geopolitical tensions in the Middle East and investor hopes for multiple Q4 2024 Fed rate cuts drove demand for gold.

ASX 200 Gains on Fed Optimism

The ASX 200 climbed by 0.84% in the week ending October 18. Expectations for multiple Q4 2024 Fed rate cuts boosted demand for rate-sensitive ASX 200-listed stocks.

Gold-related stocks led the gains, with Northern Star Resources Ltd. (NST) surging by 6.95%, tracking gold spot prices higher.

Aussie banking stocks rallied as investors bolstered bets on multiple Fed rate cuts. Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) saw gains of 5.32% and 5.10%, respectively. Aussie banking stocks draw investor interest during monetary policy easing cycles because of their higher dividend yields.

However, sliding iron ore prices continued impacting mining stocks. BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) slid by 3.15% and 1.64%, respectively.

Nikkei Index Down Despite Weaker Yen

In the week ending October 18, the Nikkei Index declined by 1.58%. The USD/JPY failed to boost demand for Nikkei Index-listed stocks, despite ending the week up 0.25% to 149.447.

Notable stock movers included Tokyo Electron (8035) which slid by 8.27%, with Sony Group Corp. (6758) ending the week down 3.68%.

Outlook

Investors should stay alert after the shifting market sentiment toward China’s stimulus measures. Fresh stimulus measures targeting domestic consumption could boost demand for riskier assets.

Meanwhile, the Middle East conflict, Bank of Japan chatter, and sentiment toward the Fed rate path also require consideration. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.