China's Property Market Crisis
Most Asian stocks moved in a flat-to-low range on Thursday as mixed business activity data from China offset growing optimism over the Federal Reserve potentially ending its rate hike cycle. Concerns over China’s property market also weighed, as Country Garden Holdings (HK:2007), China’s biggest property developer, logged a nearly $7 billion loss and warned of a potential default. However, losses in regional stocks were limited by some positive cues from Wall Street, as U.S. indexes ended higher on Wednesday due to softer-than-expected GDP and employment data, pointing to limited economic headroom for the Fed to keep raising interest rates. More U.S. economic readings are also on tap this week.
Asian Economic Readings
Despite most Asian indexes nursing steep losses for August, given that U.S. rates are likely to remain higher for longer, concerns over an economic slowdown in China dented sentiment towards the region. However, some strong regional economic readings helped. Japan’s Nikkei 225 index rose 0.5% due to stronger-than-expected retail sales data for July, although a separate reading showed that industrial production declined further in the month. The Nikkei was also trading down nearly 2% for August.
High-Interest Rates Affect South Korea
South Korea’s KOSPI fell 0.4% on Thursday, hit by a bigger-than-expected decline in retail sales and industrial production, as the country grapples with high-interest rates and sticky inflation. The KOSPI was also down 3.2% for August. Hong Kong’s Hang Seng index was kept in positive territory by strength in heavyweight tech stocks, while Country Garden also saw some bids on hopes that the government will offer more support to the property market. Some provincial governments in China cut mortgage rates this week to help support the beleaguered sector.
Chinese Shares and Stimulus Measures
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell between 0.1% and 0.2% after data showed that the country’s manufacturing sector shrank for a fifth straight month in August, albeit at a slower-than-expected pace. But non-manufacturing activity grew less than expected in the month, fueling concerns that a property sector slowdown was taking its toll on the economy. Chinese indexes were also by far the worst Asian performers in August, down between 5% and 8%. The Hang Seng in particular saw steep losses on weakness in property stocks earlier in the month. Markets are now awaiting more stimulus measures from China, with media reports suggesting that the People's Bank is likely to cut mortgage and deposit rates in the coming weeks.
Australia and India Market Movements
Concerns over China kept Australia’s ASX 200 trading sideways on Thursday, with the index set for a 1.5% loss in August. Indian shares saw a muted open ahead of key June-quarter GDP data due later in the day. The Indian economy is expected to have grown 7.7%, its fastest pace in a year, thanks to robust industrial production and consumer spending. But the Nifty was still trading down 2% for August, hit by a mix of profit-taking and weakness in technology stocks. Concerns over a resurgence in Indian inflation also weighed, as high vegetable prices and a weak monsoon spurred a substantially higher-than-expected consumer inflation reading for July.