Asian markets swung on China stimulus ambiguity

Asian stocks were mixed on Monday as investors struggled to decipher China’s economic stimulus promises, which were light on specifics.

Finance Minister Lan Foan pledged to “significantly increase” debt but provided little clarity on the overall stimulus size, leaving investors uncertain about its impact on the stock market rally.

The Hang Seng Index declined 0.41 per cent, while the CSI300 and Shanghai Composite indices rose by 1.52 per cent and 1.66 per cent, respectively. Property stocks gained on expectations of stimulus benefits to the beleaguered sector.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose marginally, with trading thinned by a Japanese holiday. US stock futures edged lower, while European futures were also slightly down.

China’s growth outlook faced additional pressure from unexpected easing in consumer inflation and deepening producer price deflation. The onshore yuan weakened against the dollar, and oil prices fell due to concerns about reduced Chinese demand.

Goldman Sachs analysts raised their China GDP forecast to 4.9 per cent but cautioned about long-term challenges such as demographics, debt deleveraging, and supply chain de-risking.

China’s third-quarter GDP data is due on Friday. Currencies remained relatively stable, with the US dollar supported by reduced expectations of a large interest rate cut. Sterling and the euro declined slightly.

Attribution: Reuters

Subediting: M. S. Salama