A man is reflected on a monitor displaying stock quotations outside a bank in Tokyo, Japan. REUTERS/Issei Kato/File photo
HONG KONG – Asian stocks experienced a decline on Tuesday as concerns arose regarding whether China’s latest rate cut would be sufficient to boost confidence in the weakening economy. Investors are hopeful for a more substantial stimulus package from Beijing. In a highly anticipated move, China cut its benchmark loan prime rates (LPR) for the first time in 10 months on Tuesday. However, the reduction of 10 basis points in the five-year LPR was smaller than anticipated by many.
The broadest index of Asia-Pacific shares outside Japan, MSCI, fell 0.72 percent. Although China’s benchmark CSI remained mostly flat, Hong Kong shares and mainland property stocks decreased after the disappointing rate cut. E-mini futures for the S&P 500 also fell 0.33 percent. The US markets were closed on Monday for a public holiday.
“I don’t believe the LPR cuts will have a significant impact,” stated Redmond Wong, Greater China market strategist at Saxo Markets. He believes that a 15 basis-point cut would have conveyed a stronger message and potentially boosted sentiment in China’s property sector. Macro-economist Aidan Yao, formerly with AXA Investment, shared a similar sentiment, stating that the Chinese economy is in a precarious state.
China’s real estate index fell 1.41 percent, further extending its losses. These rate cuts are the latest in a series of measures by Beijing to support the slowing recovery of the world’s second-largest economy, which faces deflation risks, property market challenges, and high youth unemployment. The People’s Bank of China reduced the medium-term lending facility rate last week, but the market was hoping for more concrete measures from a cabinet meeting on Friday, which did not materialize.
The delay in further stimulus measures has had a negative impact on market sentiment. Citi is the most recent big bank to lower its growth forecasts for the Chinese economy. Rodrigo Catril, National Australia Bank Senior FX Strategist, suggests that any concrete announcements on a new round of stimulus will likely come after China’s Politburo meeting in July, headed by President Xi.
During US Secretary of State Antony Blinken’s visit to Beijing, China and the United States failed to make any significant breakthrough. However, both sides agreed to stabilize relations to avoid escalating conflicts. While this helped improve sentiment, there is still awareness of the strategic competition between the US and China.
Stocks in Hong Kong fell 1.47 percent, with the tech gauge dropping 2.41 percent due to disappointment over the size of China’s rate cuts and ongoing concerns about US-China tensions. Japan’s Nikkei also fell 0.24 percent on Tuesday. In contrast, Australian shares hit a seven-week peak, with commodity stocks driving the surge.
A central banker hinted at possible policy adjustments from the current path of aggressive rate hikes. The benchmark US 10-year Treasury yield rose 3.1 basis points. US crude fell 1.28 percent to $70.86 per barrel, while Brent was at $75.90, down 0.25 percent on the day. The US dollar index rose 0.117 percent, with the euro down 0.09 percent to $1.0912. Spot gold dropped 0.12 percent to $1,947.7 per ounce.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.