HONG KONG (BLOOMBERG) - Xi Jinping’s speech marking the 40th anniversary of China’s reform era was one that Asia’s equity investors had their eyes on Tuesday. But his comments weren’t what they were hoping for.
No new initiatives for reform measures were mentioned, and it ended up being a speech about what the nation’s Communist Party had done so far. That was a disappointment for investors who were expecting to hear more about specific policies for further opening of China’s economy.
Japan’s Topix index hit a session low in afternoon trading, Chinese equities slumped and in South-east Asia, several benchmark indexes including those of Singapore and the Philippines plunged by more than 1.5 per cent as the US stock carnage seeped into Asian markets. Overnight in New York, the S&P 500 Index closed at its lowest in 14 months on Monday.
Japan’s Topix index fell 1.6 per cent while the Nikkei 225 was down 1.6 per cent. Hong Kong’s Hang Seng Index dropped 0.9 per cent while the Shanghai Composite slid 1.1 per cent.
South Korea’s Kospi index was 0.5 per cent weaker while Australia’s S&P/ASX 200 was down 0.8 per cent.
Singapore’s Straits Times Index was down 1.8 per cent.
Expectations that Xi’s speech would give stocks a boost (or at least, prevent a sell-off) were thwarted, and since “nothing special” was announced, Asian shares are following the overnight sell-off in the US, said said Castor Pang, head of research at Core Pacific-Yamaichi International HK.
Francis Lun, chief executive officer of Geo Securities, agreed. Investors were disappointed by the speech as they had been expecting some comments on economic stimulus or the further opening-up of the Chinese economy, he said. “But he didn’t mention it. That’s why A shares dropped 1 per cent and also dragged down Hong Kong stocks.”
But compared with the US, where the equity benchmark slid more than 2 per cent, the MSCI Asia Pacific Index’s 0.9 per cent as of 12:58 p.m. in Hong Kong looked tame. And US stock-index futures were still holding on to some gains Tuesday, despite paring an advance of as much as 0.5 per cent for S&P 500 contracts.
With nothing special announced in Xi’s speech, investors have likely pivoted back to the interest-rate decisions expected this week. First up, the Federal Open Market Committee holds its final two-day meeting of 2018 and the result will be announced Dec. 19. in Washington. Then comes the Bank of Japan and Bank of England.
“This week could be a turning point for Asian equities, with the FOMC happening and investors focusing on how determined China is about rekindling its economy,” said Lee Kyoung-min, a Seoul-based senior analyst with Daishin Securities Co.
Citigroup’s Ken Peng may have summed it up well: “So Xi and Powell...Santa Claus or Grinch?”
Crude prices are around 18-month lows, having fallen about a third from recent highs at the start of October.