Asia stocks were on the back foot on Friday as fears of a US recession took hold, with Hong Kong hit hardest, dragged down by plunging tech shares to post its biggest monthly drop in a year.
But some traders see a slowing US economy lengthening the odds on more severe central bank tightening and there was some bargain buying, especially in some of the region’s emerging markets.
Japan’s Nikkei reversed its course to close slightly lower, as concerns about corporate earnings grew after Toyota supplier Denso cut its outlook, while a firmer yen also weighed on exporters.
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The Nikkei share average settled 0.05% lower at 27,801.64 after rising 0.7% earlier in the session. The index inched down 0.4% for the week. The broader Topix fell 0.44% to 1,940.31 and posted a 0.8% weekly loss.
Hong Kong stocks ended lower to end with their biggest monthly drop since July 2021, pressured by sharp losses in major tech firms, which reignited investor worries over a clampdown on the tech sector, while mainland China stocks also fell.
At the close, China’s blue-chip CSI300 Index fell 1.3% to 4,170.10 points, and it also lost 7% to book the biggest monthly loss since March.
And after Beijing omitted any reference to its full-year GDP growth target following a high-level Communist Party meeting, the Shanghai Composite Index ended the session lower by 0.9% at 3,253.24 points, losing 4.3% in July, snapping a two-month winning streak.
The Shenzhen Composite Index on China’s second exchange dropped 1%, or 22.00 points, to 2,181.25.
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In Hong Kong, the benchmark Hang Seng Index dropped 2.3% to 20,156.51 points, losing 7.8% for the month. Chinese H-shares listed in Hong Kong plunged 2.8% to 6,885.48 points.
Sharp losses in Hong Kong were led by major tech firms as investors worried about continued regulatory clampdowns on the sector after a Wall Street Journal report said Chinese billionaire Jack Ma planned to cede control of fintech giant Ant in an effort to break ties with its parent company Alibaba.
Hong Kong shares of Alibaba Group slumped 6.1% at the close and shares of China’s food ordering and delivery platform Meituan fell 6.2%.
The Hang Seng Tech Index, a gauge that tracks the performance of major tech firms listed in the financial hub, fell 4.9% by the close.
Australian shares logged their first monthly rise in four, with miners leading gains on Friday, as signs of an economic slowdown and cooling inflation raised hopes of a less aggressive central bank monetary policy.
The S&P/ASX 200 index ended up 0.8% at 6,945.20, its highest closing level since June 9. The benchmark gained 5.7% in July.
Elsewhere across the region, other markets posted gains with equities in Jakarta and Taipei up. Indian stocks also rose with Mumbai’s signature Nifty 50 index up 0.95%, or 160.65 points, at 17,090.25. Shares in Manila, however, were down 1.3%.
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Globally, stocks rose and were on course for their best month since late 2020 as traders bet a weakening US economy could slow the pace of monetary tightening.
Futures markets now predict that US interest rates will peak by December this year compared to June 2023 at the start of July month and the Federal Reserve will cut interest rates by nearly 50 bps next year to support slowing growth.
The MSCI World index was last up 0.3%, on course for a near-6% monthly gain, its best since November 2020, buoyed by broad gains across European markets, with the STOXX Europe 600 up 0.8%.
US stocks look set to gain later in the session, with futures for the S&P 500 and Nasdaq up 0.7% and 1.4%, respectively, buoyed in part by strong overnight earnings from Amazon and Apple.
Despite the positive end to the month for stocks, Mark Haefele, chief investment officer at UBS Global Wealth Management, said investors should proceed with caution.
“In the near-term, we think the risk-reward for broad equity indexes will be muted. Equities are pricing in a ‘soft landing’, yet the risk of a deeper ‘slump’ in economic activity is elevated.”
Across commodities, Brent crude futures and US West Texas Intermediate crude were last up 1.3%-1.7% as concerns about supply shortages ahead of the next meeting of OPEC ministers just about offset doubts around the economic outlook.
Key figures
Tokyo – Nikkei 225 < DOWN 0.05% at 27,801.64 (close)
Hong Kong – Hang Seng Index < DOWN 2.3% at 20,156.51 (close)
Shanghai – Composite < DOWN 0.9% at 3,253.24 (close)
New York – Dow > UP 1% at 32,529.63 (close)
- Reuters with additional editing by Sean O’Meara
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