Hang Seng Dips on China Worry, Nikkei Inches Up on BoJ Hopes

Asian shares inched down on Tuesday as pessimism over China’s economic outlook widened and investors kept to the sidelines ahead of central bank meetings in the US and Japan.

Hong Kong’s Hang Seng index saw the biggest losses in the region, falling 1.38% to close at 17,002.91, amid concerns around China where the July Politburo meeting announced no new detailed efforts to boost the economy.

That was despite a rising urgency for policymakers to release further stimulus as the ongoing property crisis and job insecurity drag on China’s growth.

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The country’s factory activity likely shrank for a third month in July, a Reuters poll showed on Monday. That was after official data showed earlier this month that the world’s second-largest economy slowed a lot more than expected in the second quarter of the year.

China will release its July official manufacturing survey (PMI) on Wednesday.

Concern about the economy weighed on mainland shares too with the blue-chip CSI300 slipping 0.63% to close at 3,369.38.

The Shanghai Composite index fell 0.43% to close at 2,879.30 led by declines in energy stocks.

Chinese H-shares listed in Hong Kong fell 1.54% to 5,986.69.

Nikkei ends higher

Meanwhile, in Japan, investors were a bit more optimistic ahead of a key central bank meeting.

While the Nikkei took off to a weak start, falling close to 1% early in the session, the index recouped all of those losses as investors bought back stocks on dips.

The Japanese benchmark closed 0.15% higher at 38,525.95.

“The Nikkei should not have fallen that much on a day like today when the market was just waiting for the central bank decisions,” said Naoki Fujiwara, senior general manager at Shinkin Asset Management.

The Bank of Japan is expected to announce quantitative tightening plans after the policy meeting on Wednesday while the market is divided about a rate hike.

Markets are pricing almost no chance of a US rate cut this week but have fully priced a 25 basis-point reduction in September.

“The market sentiment will be lifted if the BOJ does not raise its policy rate tomorrow, and the yen will weaken, which is also good for stocks,” said Fujiwara.

Chip-making equipment manufacturer gave the biggest boost to the Nikkei rising 0.84%.

Elsewhere across the region, Mumbai, Taiwan and Bangkok closed in the green while Singapore, Seoul, Jakarta and Manila edged down. MSCI’s broadest index of Asia-Pacific shares outside Japan was lower by 0.5% as of 11:34 GMT.

Commodities fall

Across the globe, commodities saw a day of weakness with oil and metals seeing the biggest losses.

Oil prices hit seven-week lows, with Brent crude futures touching $79.70 as traders focused on worries over Chinese demand rather than tensions in the Middle East or Venezuela, and turned sellers.

Copper and iron ore prices fell too, while zinc and aluminium slipped to multi-month lows.

“The consensus is that the US economy is going to be softer this quarter and maybe next quarter as well and you can’t really rely on the euro area to offer any compensation for that. China has got its own problems and doesn’t look like it’s going to snap into gear,” Daiwa Capital economist Chris Scicluna said.

“Understandably, we might have been hoping for the global economy to be gaining traction and momentum to be picking up at this stage in the cycle, but it looks like maybe things are coming off the boil a bit,” he said.

Later in the day, Microsoft and chipmaker AMD will report earnings after the bell in New York, while preliminary CPI data is due in Germany and Spain.

Australian inflation data will also be released on Wednesday and the Bank of England is priced for a roughly even chance of a rate cut at its policy meeting on Thursday.

Key figures

Tokyo – Nikkei 225 > UP 0.15% at 38,525.95 (close)

Hong Kong – Hang Seng Index < DOWN 1.37% at 17,002.91 (close)

Shanghai – Composite < DOWN 0.43% at 2,879.30 (close)

London – FTSE 100 < DOWN 0.16% at 8,279.39 (1134 GMT)

New York – Dow < DOWN 0.12% at 40,539.93 (Monday close)

Reuters, with additional editing by Vishakha Saxena

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]