Asian stocks pare drop with Aussie dollar as China GDP beats estimates, STI down 0.2%

Passersby are reflected on a stock quotation board at a brokerage in Tokyo, Japan.
Passersby are reflected on a stock quotation board at a brokerage in Tokyo, Japan. PHOTO: REUTERS

WELLINGTON (BLOOMBERG) - Asian stocks pared losses with Australia's dollar on Monday (Oct 19) as China reported third-quarter economic growth that beat estimates.

The Shanghai Composite Index swung to a gain as the better- than-estimated 6.9 per cent expansion in gross domestic product, while still being slowest pace since the global financial crisis, signaled the government's stimulus policies may be taking hold. Economists had projected GDP growth of 6.8 per cent.

The MSCI Asia Pacific Index lost 0.2 per cent by 11:15 am in Tokyo, slipping from its highest level since Aug 20. The Topix index in Tokyo snapped a two-day climb, falling 0.4 per cent, while the Kospi index in Seoul swung between gains and losses with Australia's S&P/ASX 200 Index.

Singapore's Straits Times Index pared its fall on opening to trade down 0.24 per cent at 3,023.33 as of 10:55 am.

Hong Kong's Hang Seng Index fluctuated, while the Hang Seng China Enterprises Index, a gauge of mainland Chinese stocks listed in the city, swung to a 0.4 per cent advance. The Shanghai Composite added 0.5 per cent.

The Aussie erased a drop to gain, while the euro and yen pared their advance. Copper and nickel declined with grains.

"The growth outlook remains subdued," Louis Kuijs, head of Asia economics at Oxford Economics Ltd. in Hong Kong, wrote in a note before the data release. "Further macroeconomic easing should follow, although there are no major stimulus plans."

China was at the centre of last quarter's global market convulsions, which led to the biggest equity wipeout in four years. Monday's data showed retail sales expanded more than estimated in September, while industrial production and fixed asset investment slowed by more than economists projected. Stocks around the world have been rallying throughout October, a bounce back that has restored more than US$4 trillion to the value of the global equity market.

Stabilization in Chinese stocks along with growing expectations the Federal Reserve will put off raising US interest rates until next year has underpinned the advance, along with a recovery in commodities from crude oil to industrial metals. Energy and raw-materials producers have driven the October gains, followed by technology stocks. The European Central Bank will issue a review on monetary policy later this week, with investors focused on any commentary on the outlook for the region's quantitative-easing program.

The economic resilience comes as a stronger services sector and robust consumption help offset weakness in manufacturing and exports. The government has cut interest rates five times since November and boosted infrastructure spending in recent months to keep growth from sliding too far below this year's target for about 7 percent.

Futures on the Standard & Poor's 500 Index dropped 0.1 per cent to 2,019.25, after the US benchmark ended Friday at an eight-week high, capping a weekly advance of 0.9 per cent.

"Although there is a lot of skepticism about official releases, markets will continue to follow closely the numbers to get an idea on how far the government is willing to let the deceleration go," Barclays Plc analysts, including Andres Jaime, a currency and rates strategist in New York, wrote in a client note, referring to Monday's data out of China. "We see some downside risks for emerging-market currencies in case data disappoint or there are more signs of financial instability in the Chinese markets in the weeks to come."