Asian equities tense at start of China’s congress

March 05, 2024 (MLN): Asian equities were broadly lower Tuesday with investors focused on China, where officials released an ambitious 5% growth target for the year alongside measures to boost confidence, as Bloomberg reported.

Shares on the mainland traded slightly higher and those in Hong Kong declined in a sign investors remain wary over Beijing’s ability to reverse an economic slowdown.

Information that began to filter through early Tuesday included a 5.5% urban unemployment and 3% inflation target alongside measures to support the economy.

“Overall I would say it probably disappoints more based on announcements thus far,” said Xin-Yao Ng, an investment director at abrdn. “Investors still will like more forceful fiscal measures to boost the economy.”

Hong Kong’s Hang Seng Tech index fell as much as 4% in a decline that partly reflected a new US government ban on Advanced Micro Devices Inc. selling an artificial intelligence chip tailored for the Chinese market, according to people familiar with the matter.

Australian shares were lower while losses for the Nikkei 225 dragged the benchmark back below the 40,000 point level it breached Monday. US equity futures edged lower in early Asian trading following a small decline for the S&P 500 on Monday.

Other measures mentioned by Chinese leaders at the annual parliamentary meetings in Beijing included a 7.2% rise in defense spending, the biggest in five years.

The nation’s premier will defy recent convention by not holding a press briefing for investors to learn more about the policy direction. This may undermine its ability to boost confidence in an economy grappling with a prolonged real estate crisis and headwinds from geopolitical tensions with the US.

“What a terrible message to send to have that wiped from the agenda,” said Richard McGregor, Senior Fellow for East Asia for the Lowy Institute. “That has been a really terrific platform for many premiers in the past to set their mark on economic policy goals.”

A Bloomberg Intelligence index of Chinese property developers fell as the country’s property debt crisis showed new signs of trouble with one of the country’s major state-backed developers placed under unprecedented scrutiny by investors.

Elsewhere, the yen was steady at around 150 per dollar as price growth in Tokyo surged back above the Bank of Japan’s target in February. The increase supports the case for the central bank’s first interest rate hike since 2007. BOJ Governor Ueda is scheduled to speak later Tuesday.

Treasuries were steady in Asian trading after 10-year yields increased four basis points to 4.22% on Monday.

Fed Bank of Atlanta President Raphael Bostic said he expects the Fed’s first cut, which he has penciled in for the third quarter, will be followed by a pause the following meeting to assess how the policy shift is affecting the economy.

Fed Chair Jerome Powell heads to Capitol Hill for his semiannual testimony before Congress on Wednesday and Thursday and is expected to double down on his message that there’s no rush to cut rates. Meantime, data forecast to show labor-market cooling should reinforce bets on policy easing.

Fed officials’ most recent quarterly forecast in December was for three quarter-point cuts this year, and the bond market has embraced that view, based on the prices of swap contracts that reference future Fed meeting dates.

“If the S&P 500 is going to make this the eighth-straight week it hits an all-time high, it will likely need to hear encouraging words from Powell about rate cuts in his two days of congressional testimony, and avoid any major surprises from jobs data,” said Chris Larkin at E*Trade from Morgan Stanley.

Nouriel Roubini, the economist known for his bearish outlook ahead of the 2008 global financial crisis, expressed optimism that US growth will remain brisk this year, though that might be a negative for stocks.

“There actually is a serious possibility of what people refer to as a ‘no landing,’ that growth remains above potential and inflation remains sticky,” Roubini told Bloomberg Surveillance. “Paradoxically, the good news on growth may be bad news for the market if that implies the Fed is not going to cut as much and as soon as people expect.”

In commodities, oil prices were little changed early Tuesday as was gold after it surged to near a record high in the previous session. Bitcoin traded above $68,000, edging toward its 2021 peak.

Copyright Mettis Link News