Business
China stocks slump to near five-year low, Moody’s changes outlook to negative
China stocks slump to near five-year low, Moody’s changes outlook to negative
China’s blue-chip stocks slumped to nearly five-year lows on Tuesday amid worries about the country’s growth, with talks of a possible cut to China’s sovereign ratings by Moody’s denting sentiment during the session.
Foreign investors sold the most shares in one month and a half, while market participants cautiously awaited fresh economic indicators and policy meetings for more clues.
After the domestic market closed, ratings agency Moody’s announced an outlook cut on China’s government credit ratings to negative from stable.
The blue-chip CSI 300 Index slumped 1.9 per cent to close at the lowest level since February 2019, while Hong Kong’s Hang Seng Index also lost 1.9pc to a one-year trough.
The outlook change reflected the increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector, Moody’s said.
The market’s weakness has fully reflected the risks in the economy and the reaction to the outlook change is overdone, said Xia Chun, chief economist of Forthright Holdings Co.
China’s Finance Ministry said it was disappointed by Moody’s downgrade, adding that the economy will maintain its rebound and positive trend. It added property and local government risks are controllable.
“Market confidence is still fragile” due to cyclical issues, said Minyue Liu, investment specialist, Asian Equities & Greater China Equities at BNP Paribas Asset Management.
A private-sector survey showed that China’s services activity expanded at a quicker pace in November. However, an official survey last week showed the sector unexpectedly contracted for the first time since December last year, prompting calls for more stimulus measures.
With the Shanghai Composite Index dropping below the key 3,000-point mark, BNP’s Liu said there could be some panic in the market.
China and broader emerging Asia market stocks were among the most net sold regions by global hedge funds in November, Goldman Sachs said.
Foreign investors sold a net 7.5 billion yuan ($1.05 billion) of Chinese shares on Tuesday, the biggest daily outflow since Oct 19.
Most sectors declined, with real estate developers, semiconductors and computers down between 2.9pc and 3.9pc. Hong Kong-listed tech giants slumped 2.1pc.
Market participants are awaiting more economic data later in the week and the upcoming Politburo meeting and the annual Central Economic Work Conference (CEWC), which usually discuss policy plans and the outlook for China.
UBS economists expect modest but explicit fiscal support to be announced during the CEWC.
The dollar steadied against major peers on Thursday, continuing its near paralysis of the past two days before more concrete announcements on tariffs from U.S. President Donald Trump.
A spate of central bank policy decisions are also due over the next week, with the Bank of Japan widely expected to raise interest rates at the end of a two-day meeting on Friday.
Rate decisions from the U.S. Federal Reserve and European Central Bank are scheduled for Wednesday and Thursday of next week, respectively.
The dollar index – which measures the currency versus six top rivals, including the euro and yen – was flat at 108.25, following two days of gains of around 0.1%.
On Monday, it tumbled 1.2%, its steepest one-day slide since November 2023, as Trump’s first day in office brought a barrage of executive orders, but none on tariffs.
So far this week, Trump has mooted levies of around 25% on Canada and Mexico and 10% on China from Feb. 1. He also promised duties on European imports, without giving details.
“President Trump has so far taken a less hostile-than-expected approach to China,” amid overall “softer-than-expected policies and tone on tariffs”, said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
At the same time, “we are cautious (that) risk sentiment remains fragile and can quickly turn sour if President Trump strikes a more aggressive tone.”
The Chinese yuan was little changed at 7.2812 per dollar in offshore trading .
Wall Street’s main indexes rose Wednesday, with the S&P 500 hitting an intraday record high thanks to strong Netflix earnings and a rally in tech shares.
Japan’s yen edged up about 0.1% to 156.40 with markets pricing 95% odds of a quarter-point hike on Friday.
The euro was flat at $1.0411. The ECB is widely expected to cut rates by a quarter point next week.
The Canadian dollar held steady at C$1.4386 against the greenback. The Bank of Canada is seen as likely to reduce rates by a quarter point next Wednesday.
The Mexican peso was little changed at 20.47 versus the U.S. currency.
Oil prices dipped in early trade on Thursday, extending losses amid uncertainty over how proposed tariffs by U.S. President Donald Trump on several countries would impact global economic growth and energy demand.
Brent crude futures fell 23 cents, or 0.3%, to $78.79 a barrel at 0135 GMT, while U.S. West Texas Intermediate crude (WTI) eased 18 cents, or 0.2%, to $75.26.
In its previous session, Brent futures settled at $79.00 in a fifth straight day of losses. WTI futures settled at $75.44 in a fourth consecutive day of declines.
Trump has said he would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine. He added these could be applied to “other participating countries” as well.
He also vowed to hit the European Union with tariffs, impose 25% tariffs against Canada and Mexico, and said his administration was discussing a 10% punitive duty on China because fentanyl is being sent to the U.S. from there.
Meanwhile, estimates from an extended Reuters poll showed that on average U.S. crude oil stockpiles were expected to have fallen by 1.6 million barrels in the week to Jan. 17.
Gasoline stockpiles were estimated to have risen by 2.3 million barrels last week, and distillate inventories were likely to have gained 300,000 barrels.
The poll was conducted ahead of the American Petroleum Institute industry group’s report and another from the Energy Information Administration at 12:00 p.m. ET (1700 GMT) on Thursday.
European wind shares fell on Tuesday (January 21).
The reports were delayed by a day due to the Martin Luther King Jr. Day federal holiday on Monday.
Pakistan and Saudi Arabia have reaffirmed their commitment to further strengthening the bilateral economic ties for shared prosperity.
The commitment was expressed when Finance Minister Muhammad Aurangzeb met with his Saudi counterpart Mohammad bin Abdullah Al-Jadaan on the sidelines of World Economic Forum Annual Meeting in Davos.
Muhammad Aurangzeb highlighted the key reform measures undertaken by the Government to promote economic stability and sustainable growth.
He briefed him on structural reforms, fiscal discipline and regulatory improvements that have contributed to an improved investment climate in Pakistan.
Earlier, Aurangzeb met Anna Bjerde, Managing Director of Operations at the World Bank.
They discussed cooperation between Pakistan and the World Bank, with a particular focus on Pakistan’s macroeconomic stability.
The finance minister emphasized the government’s strong partnership with the Bank and expressed hope that the World Bank would continue playing a key role in the country’s socio-economic development.
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