Asian share and currency rally ends as China trade data add to growth woes, STI down 0.8%

A man looking at the Nikkei 225 at the Tokyo Stock Exchange in Tokyo on Oct 6, 2015.
A man looking at the Nikkei 225 at the Tokyo Stock Exchange in Tokyo on Oct 6, 2015. PHOTO: AFP

HONG KONG (AFP, BLOOMBERG) - A near 18 per cent slump in Chinese imports added to worries about a slowdown in the world's number two economy on Tuesday (Oct 13), sending Asian equities and emerging currencies lower as investors flocked to safe assets.

A more than week-long rally across regional markets came to an end as profit-takers moved in and worries about China resurfaced with the weak trade figures.

In morning trade, Shanghai was 0.13 per cent lower, Hong Kong lost 0.82 per cent and Sydney - where several firms that rely on trade with China are listed - shed 0.82 per cent. Tokyo was 0.93 per cent off by lunch, while there were also losses in Seoul, Taipei and Jakarta.

Singapore's Straits Times Index was down 0.78 per cent at 3,008.49 as of 12:07pm.

However, there were hopes that leaders in Beijing would use the latest report to unveil a fresh round of stimulus measures, having seen five interest rate cuts since November fail to provide any boost.

Adding to downward pressure across Asia was a sell-off in energy firms that was fuelled by a plunge in oil prices late Monday and the weak data from China, the world's top energy user.

Comments from Federal Reserve officials suggesting the central bank will delay a US interest rate hike until next year were also unable to shore up confidence.

China said imports fell 17.7 per cent year-on-year in September as the nation's property sector stuttered, leading to a knock-on effect for the crucial construction industry.

Exports slipped 1.1 per cent owing to weak overseas demand.

The Asian giant is the world's leading trader in goods but its slowing economic growth has seen prices plunge for the commodities it uses, fuelling turmoil through producer countries such as Australia.

A slew of data out of Beijing has raised a red flag about the economy, which is growing at around seven percent, its slowest pace in a quarter of a century.

"Import growth remained sluggish, suggesting weakening domestic demand, particularly investment demand," said Yang Zhao, China economist at Nomura Holdings in Hong Kong. "We maintain our view that GDP growth will decline to 6.7 per cent in the third quarter."

"The data are not good but still acceptable to investors," said Wu Kan, a Shanghai-based fund manager at JK Life Insurance. "As long as the data remain sluggish, the market will be anticipating growth-boosting measures from the government."

World markets suffered their worst quarter for four years in July-September owing to fears about the effects of China's growth slowdown as well as speculation the Fed would hike rates. A Chinese yuan devaluation in August sent shares into a sharp downward spiral.

But they have enjoyed a bumper October so far after the Fed indicated it could hold off a rise in borrowing costs because of the weak global economy.

However, Tim Schroeders, a portfolio manager at Pengana Capital in Melbourne, warned: "China's weakening economy slowdown will continue to weigh on the market.

"We've had fairly significant lift in equities on speculation the Fed will delay raising rates. That's now well priced into valuations."

The risk-off mood weighed on emerging currencies, which have benefited this month from speculation the Fed will not raise rates.

In early exchanges, the Indonesian rupiah was 1.3 per cent lower, while the Malaysian ringgit shed 0.9 per cent. There were also big losses for the Australian dollar, which relies on resources exports to China.

On oil markets, both main contracts edged up after plunging more than five per cent Monday on profit-taking and continuing concerns about a supply glut.

Prices had surged almost 10 per cent this month, helped by comments from the Opec cartel that demand was seen picking up this year and next.

But while US benchmark West Texas Intermediate rose 0.76 per cent to US$47.46 and Brent climbed 1.10 per cent to US$50.41 a barrel in morning Asian trade, regional energy giants took a hit.

Sydney-listed Santos lost five per cent and Origin was seven per cent lower. And in Hong Kong, CNOOC shed more than three perc ent while PetroChina was almost four per cent lower. Inpex sank four per cent and JX Holdings lost almost two per cent in Tokyo.

Oil has rallied since hitting six-year lows in late August, with last week seeing healthy gains in line with global equities on waning expectations the US Federal Reserve will hike borrowing costs this year, pushing the dollar lower.