Hang Seng Index Plummets as China Reopens Without New Policy Measures

US Equities Slide on Middle East and Fed Jitters

As tensions rise in the Middle East and uncertainty looms over Fed policy, US Equity Markets reversed Friday’s gains, with tech stocks bearing the brunt of the slide.

The Nasdaq Composite Index slid by 1.18%, while the Dow and the S&P 500 declined by 0.94% and 0.96%, respectively.

Middle East and the Fed in Focus

On Monday, crude oil prices surged on fears of supply disruption, with WTI breaking above $77. Investors awaited an Israeli response to Iran’s missile strike as Israel and the US discussed potentially targeting Iran’s oil facilities.

Expectations of a less dovish Fed rate path contributed to the losses after Friday’s upbeat US Jobs Report. On Monday, the CME FedWatch Tool indicated an 85.9% chance of a 25-basis point November Fed rate cut and a 14.1% chance that the Fed would hold steady.

Expert Views on the Fed Rate Path

Wall Street Journal Chief Economics Correspondent Nick Timiraos noted,

“A very solid September payroll report probably takes a lot of the drama out of the November Fed meeting and likely leaves officials on course for a 25 bps cut.”

China’s Optimism for 2024 Falls Short of Investor Expectations

On Tuesday, October 8, FICC Investor CN Wire shared updates from the National Development and Reform Commission (NDRC) press conference:

“Consumption in the market was robust during the just-concluded National Day holiday, full of confidence in achieving the target tasks of economic and social development for the whole year. China’s financial sector has recently stepped up its efforts to launch a package of incremental policies to promote a sustained economic upturn for the better.”

However, the lack of fresh policy measures from Beijing disappointed investors.

Hang Seng Index Slides as China Reopens

In Asia, the Hang Seng Index tumbled by 7.43% on Tuesday morning. Investors reacted to the overnight pullback in the US and a lack of fresh policy measures from Beijing. Real estate and tech stocks suffered heavy losses.

The Hang Seng Tech Index (HSTECH) slid by 11.09%, while the Hang Seng Mainland Properties Index (HMPI) was down 14.58%. Notable tech stock movers included Baidu (9888) and Tencent (0700), which saw losses of 6.58% and 6.28%, respectively. Real estate stocks saw heavier losses, with Agile Group Holding (3393) tumbling 28.33%.

However, the Mainland China equity markets reopened with solid gains as investors played catch up after the National Holiday. The CSI 300 and Shanghai SEC Composite rallied 7.17% and 6.00%, respectively.

Nikkei Index Retreats Despite Household Spending Rebound

Meanwhile, the Nikkei 225 declined by 1.10% on Tuesday morning, as the USD/JPY pair fell by 0.34% to 147.672.

Better-than-expected household spending figures boosted demand for the Japanese Yen. Household spending jumped by 2.0% in August, reversing a 1.7% decline from July. Household spending could fuel demand-driven inflation, potentially leaving a Q4 2024 Bank of Japan rate hike on the table.

Nissan Motor Corp. (7201) slid by 4.80%, while Sony Corp. (6758) and Softbank Group Corp. (9984) saw declines of 2.66% and 2.71%, respectively.

ASX 200 Slips Despite Gains in Oil, Gold, and Bank Stocks

On Tuesday, the ASX 200 Index declined by 0.15%, giving up early gains. Losses in mining and tech stocks outweighed gains in the oil, gold, and banking sectors.

Mining giants BHP Group Ltd. (BHP) and Fortescue Ltd. (FMG) saw losses of 0.85% and 2.75%, respectively, as iron ore prices tumbled 3.27%. The NDRC press conference impacted investor sentiment, overshadowing the RBA Meeting Minutes and Aussie data.

Tech stocks tracked the Nasdaq Composite Index’s overnight losses, with the S&P/ASX All Technology Index down by 0.94%.

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 informed with our latest news and analysis to manage positions across the Asian equity markets.