Hang Seng Index Falls Despite China Stimulus – Asian Market Weekly Recap

US Equity Markets: Nasdaq Hits Seven-Week Winning Streak

The US equity markets had a mixed week ending October 25. The Nasdaq Composite Index extended its winning streak to seven weeks, gaining 0.16%. In contrast, the Dow Index and the S&P 500 saw declines of 2.68% and 0.96%, respectively. The Nasdaq bucked the trend as Tesla (TSLA) surged 21.93% on its Q3 earnings beat and positive outlook.

US Presidential Election jitters impacted buyer demand for riskier assets, with little separating Kamala Harris and Donald Trump. In the bond market, 10-Year Treasury yields reflected market unease, reaching a mid-week peak of 4.260% before ending the week at 4.242% (+0.157 bps). Higher yields affected market risk sentiment.

However, expectations of Fed rate cuts in November and December cushioned the downside for the Dow and the S&P 500. According to the CME FedWatch Tool, the chances of a 25-basis point November Fed rate cut increased from 90.4% (October 18) to 95.4% (October 25). Furthermore, the probability of a 25-basis point December Fed rate cut stood at 75.3%.

US Economic Indicators: Services PMI and Labor Market Resilience

On Thursday, US economic indicators bolstered expectations for a soft US economic landing. The S&P Global Services PMI unexpectedly increased from 55.2 in September to 55.3 in October. Accounting for almost 80% of the US economy, a pickup in new orders and activity was crucial. Meanwhile, softer service sector inflation fueled speculation about multiple Q4 2024 Fed rate cuts.

US labor market data also supported hopes for a soft landing. Initial jobless claims fell from 242k (week ending October 12) to 227k (week ending October 19). Upbeat employment figures are crucial, with private consumption accounting for over 60% of GDP.

China Policy Measures and IMF Forecasts

Early in the week, the People’s Bank of China (PBoC) cut 1-year and 5-year loan prime rates (LPR) by 25 basis points. Markets reacted positively to the move as lower borrowing costs could drive credit demand and consumption. Additionally, the PBoC conducted its first operation of the Securities, Funds, and Insurance Companies Swap Facility (SFISF), boosting demand for China-linked equities.

The PBoC’s policy maneuvers fanned hopes for consumer-targeted stimulus measures from Beijing. However, the IMF’s latest growth projections, released on Tuesday, October 22, called for caution. The IMF lowered China’s 2024 growth forecast from 5.0% to 4.8%. Commenting on China’s policy measures, the IMF stated that Beijing’s maneuvers may not be enough to support an economic recovery.

Expert Views on China

Natixis economist Alicia Garcia-Herrero commented on Beijing’s policy measures, stating,

“Beijing could deploy as much as 6 trillion yuan ($842.9 billion) in new fiscal stimulus, but the fund will be more of a ‘risk package’ to recapitalize banks, clean up sold but unfinished housing units and ease local governments’ hidden debt. This is to solve the deflationary pressure, not to stimulate consumption yet.”

Hang Seng Index Declines Amid Global Market Pressure

The Hang Seng Index extended its losing streak to three weeks, declining by 1.03%. The Hang Seng Index succumbed to rising US Treasury yields, tracking the Dow and S&P 500 into negative territory.

Real estate and tech stocks contributed to the decline. The Hang Seng Mainland Properties Index (HMPI) declined by 2.04%, while the Hang Seng Tech Index (HSTECH) ended the week down 1.37%.

Tech giants Baidu (9888) and Alibaba (9988) slid by 6.70% and 5.12%, respectively. However, real estate stocks saw heavier losses, with Shimao Group Holdings (0813) tumbling 19.86% in the week ending October 25.

On the Mainland, PBoC’s stimulus measures and hopes for further policy announcements drove demand for Mainland China-listed equities. The CSI 300 gained 0.79%, while the Shanghai Composite advanced by 1.17%.

Commodity Markets: Crude Oil, Iron Ore, and Gold

Hopes for further stimulus measures from Beijing pushed iron ore prices higher. Iron ore spot increased by 3.19% in the week. Gold advanced by 0.96%, striking an all-time high of $2,758.

Additionally, WTI Crude also ended the week higher. Notably WTI Crude Oil rallied 2.27% on Friday alone, closing the week at $71.78. Concerns about possible supply disruption from the Middle East drove oil prices higher.

ASX 200 Ends the Week in Negative Territory

The ASX 200 declined by 0.87% in the week ending October 25, reversing a 0.84% gain from the previous week. Rising US Treasury yields impacted buyer demand for banking and tech stocks.

The S&P/ASX All Technology Index ended the week down by 1.67%. Aussie banking stocks National Australia Bank (NAB) and Westpac Banking Corp. (WBC) declined by 0.59% and 0.83%, respectively.

Meanwhile, gold-related stocks reacted to gold spot price trends, with Northern Star Resources Ltd. (NST) rallying 7.08%. Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) ended the week with gains on higher iron ore spot prices.

Nikkei Index Falls Ahead of General Election

In the week ending October 25, the Nikkei Index fell by 2.74% despite a weaker Japanese Yen. The USD/JPY rallied 1.87% in the week, striking a mid-week high of 153.184 before easing back. Higher US Treasury yields and uncertainty about Japan’s general election impacted demand for Nikkei Index-listed stocks.

Notable stock movers included SoftBank Group Corp. (9984), which slid by 3.59%, while Tokyo Electron (8035) declined by 1.19%. Nissan Motor Corp. (7201) gained 0.10%, with the weaker Yen bolstering demand for export-linked stocks.

Outlook

Investors should stay vigilant, with stimulus measures from Beijing, the Middle East conflict, and the US Presidential Election in focus. For the Nikkei, Japan’s general election results and the Bank of Japan’s penultimate 2024 interest rate decision require consideration. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.