Hang Seng Index Tumbles 6.5% on China’s Stimulus News – Asian Market Weekly Recap

US Equity Markets Extend Winning Streak

The US equity markets extended their gains for the fifth consecutive week. Notably, the Dow gained by 1.21% in the week ending October 11. The Nasdaq Composite Index and the S&P 500 advanced by 1.13% and 1.11%, respectively.

Investor bets on a 25-basis point November Fed rate cut, along with hopes of a soft US landing, drove demand for riskier assets.

US Economy and the Fed Rate Path

US inflation and labor market data influenced sentiment toward the Fed rate path. The annual core inflation rate rose from 3.2% in August to 3.3% in September. Higher core inflation dampened expectations for a 25-basis point November Fed rate cut.

Despite higher core inflation, weaker labor market data and softer producer price trends supported hopes for a 25-basis point Fed rate cut.

Initial jobless claims jumped from 225k (week ending October 5) to 258k (week ending October 12). Furthermore, producer prices rose at a less marked pace, suggesting a possible pullback in demand.

Disappointment Over China’s Stimulus Measures

Investor euphoria toward recent stimulus measures from China faded, impacting Hong Kong and Mainland China-listed stocks. On Tuesday, the National Development and Reform Commission (NDRC) disappointed investors with no fresh stimulus measures. The disappointment overshadowed hopes for a US soft landing and multiple Q4 2024 Fed rate cuts.

Expert Views on China

Natixis economist Alicia Garcia-Herrero commented on the NDRC press conference, stating,

“The market really expected more. The correction will be even stronger if the data on the Golden Week in terms of consumption is weak. The market is reacting to the lack of a real fiscal stimulus. I would not have organized a press conference not to announce anything new.”

Hang Seng Index and Mainland Chinese Equity Markets Stumble

In the week ending October 11, the Hang Seng Index tumbled by 6.53%, partially reversing gains of 10.20% from the previous week.

Real estate and tech sector-related stocks suffered heavy losses, leaving the Hang Seng in negative territory. The Hang Seng Tech Index (HSTECH) ended the week down 9.39%, while the Hang Seng Mainland Properties Index (HMPI) tumbled by 14.07%.

Leading tech names, including Baidu (9888) and Alibaba (9988), slid by 8.60% and 7.11%, respectively, while Tencent (0700) declined by 7.89%.

From the real estate sector, Longfor Group Holdings Ltd. (0960) (-21.11%), Shimao Group Holdings Ltd. (0813) (-19.63%), and Agile Group Holdings Ltd. (3383) (-34.71%) saw sharper losses.

On the Mainland, the CSI 300 fell by 3.25%, while the Shanghai Composite ended the week down 3.53%, impacted by sentiment toward Beijing’s stimulus measures.

Commodities Reflect China Worries

Disappointment over China’s policy measures pressured iron ore prices lower. Iron ore spot ended the week down 2.52%. Concerns about Beijing’s stimulus measures impacted demand expectations.

However, gold advanced by 0.14% to $2,657.03 on investor hopes for multiple Q4 2024 Fed rate cuts.

ASX 200 Gains Amid US Optimism

The ASX 200 advanced by 0.79% in the week ending October 11. Sentiment toward the Fed rate path drove demand for rate-sensitive ASX 200-listed stocks.

The S&P/ASX All Technology Index gained 2.90%, with banking stocks also trending higher. ANZ (ANZ) and National Australia Bank (NAB) ended the week up 2.53% and 2.33%, respectively. Bets on multiple Q4 2024 Fed rate cuts drove demand for the high-yielding bank stocks.

However, sliding iron ore prices impacted demand for mining stocks. BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) saw declines of 2.58% and 3.32%, respectively. Rio Tinto Ltd.’s share price fell despite acquiring Arcadium Lithium (LTM) for $6.7 billion.

Nikkei Index Rallies on Yen Trends

A weaker Japanese Yen drove demand for Nikkei Index-listed stocks. In the week ending October 11, the Nikkei Index rallied 2.51% as the USD/JPY gained 0.29%, closing the week at 149.080.

Notable stock movers included Softbank (9984), which gained 4.59%, with Fast Retailing Co. Ltd. (9983) surging by 10.73%. Sony Corp. advanced by 1.73%.

Outlook

Investors should consider economic indicators and policy measures from the weekend. Investor reaction toward a lack of fresh policy measures from China and September’s inflation figures could test demand for HK and Mainland-listed stocks. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.