China jitters drag Asia stocks to 7-month low

Asia's stock markets fell to fresh troughs on July 27, 2021. PHOTO: AFP

HONG KONG (REUTERS) - Asia's stock markets fell to fresh troughs on Tuesday (July 27) led by a third straight session of heavy selling in Chinese Internet giants, while bond and currency markets traded on edge ahead of the United States Federal Reserve policy meeting.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.25 per cent to its lowest level since mid-December, extending a low set the day before.

The Hong Kong benchmark fell 0.59 per cent, its third day of declines, with the Hang Seng Tech index down 2 per cent to its lowest since its inception in July last year. It is down about 11 per cent in three days and has lost 40 per cent from a February peak.

Big decliners included Meituan, whose shares fell 8.15 per cent, and Alibaba, with a 3.38 per cent drop. Both were down for the third day in succession, with investors expecting the companies' food-delivery arms to be affected by new regulations guaranteeing workers above minimum pay.

In onshore markets, Chinese blue-chips fell 0.26 per cent after closing on Monday at their lowest since December thanks to regulatory crackdowns in the education and property sectors.

"The market seems to be uncertain whether there will be more policy changes for fintech, social media platforms, delivery platforms and ride-hailing platforms," said Dr Iris Pang, chief economist for Greater China at ING.

"Each has their own issue and faces different regulatory actions, so the market is looking for 'which technology subsector will be next?' "

Elsewhere in Asia, markets were a little more optimistic, with Japan's Nikkei rising 0.35 per cent and Australian shares up 0.54 per cent. S&P 500 futures dipped 0.1 per cent and Euro STOXX 50 futures were broadly steady.

Singapore's Straits Times Index was up 0.5 per cent at the midday break.

US corporate earnings and the Federal Reserve's monetary policy meeting were also on investors' minds.

"It's profits and the Fed. The next couple of days are going to be monumental as everyone tries to figure out how strong corporate fundamentals are at the moment and in what context that is happening in terms of the economic outlook and policy settings," said IG Markets analyst Kyle Rodda.

Alphabet, Apple and Microsoft are set to publish quarterly results late on Tuesday, with Amazon.com's due later in the week.

In addition, the Federal Reserve will begin its two day meeting later on Tuesday, with investors set to scrutinise a statement and press conference from Fed Chair Jerome Powell due late Wednesday.

They will be looking to see how the central bank will balance fast-rising prices with the complication of increased coronavirus infections.

All three major US stock indexes eked out record closing highs for a second straight session on Monday but S&P 500 futures dropped 0.14 per cent.

The looming Fed meeting kept a dampener on major moves in other asset classes.

The dollar hovered a little below recent highs, with the euro and pound sterling gaining some ground, the latter helped by a decline in new daily Covid-19 cases in Britain.

US Treasury yields rose in early Asian trading on Tuesday, following a choppy Monday.

The yield on benchmark 10-year Treasury notes was 1.2812 per cent compared with its US close of 1.276 per cent, while the two-year yield touched 0.2134 per cent compared with a US close of 0.196 per cent.

Gold was slightly higher, with spot gold trading at US$1,797.28 per ounce, while US crude ticked up 0.43 per cent to US$72.22 a barrel.

Bitcoin dropped to below US$37,000 from a Monday peak of US$40,581 after Amazon.com offered a qualified denial of a weekend news report that said it was preparing to accept cryptocurrencies.

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