Asia-Pacific stocks fell after China’s banking regulator worried about bubbles in foreign markets, a day after Wall Street posted its best performance in nearly nine months.
Hong Kong’s benchmark Hang Seng fell 1.6% on Tuesday, reversing initial gains, while China’s CSI 300 index of Shanghai and Shenzhen-listed stocks fell 2% and the S & P / Australian ASX 200 fell 0.4%.
Enthusiasm for US stocks also waned following comments from the Chinese regulator, with futures tipping the S&P 500 to fall 0.3% when trading on Wall Street opens. The FTSE 100 was expected to lose 0.2%.
“I am afraid that the bubble problem in foreign financial markets will someday arise,” Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said at a briefing in Beijing. He underlined the gains on the American and European markets made possible by an ultra-flexible monetary policy, which, according to him, had “seriously diverged” from the real economy.
“The Chinese market is now closely linked to foreign markets and foreign capital continues to flow,” Guo said, according to the Chinese state-backed Securities Times, in a nod to the appetite of global investors for Chinese stocks and bonds. He added that if China could manage the scale and speed of the inflows, “we must prevent the volatility [China’s] domestic financial market to become too big ”.
Japan’s Topix fell 0.4%, dampened by finalized data which shows fourth-quarter capital spending fell nearly 5% from a year ago. This deviated markedly from a preliminary reading showing an increase of 4.5 percent and raised questions about the strength of the country’s economic recovery.
Movements in Asia followed a banner session for Wall Street that ended with a 2.4% rise for the blue-chip S&P 500 and a 3% rally for the tech-focused Nasdaq.
The gains came as public debt markets extended their rebound after last week’s liquidation. The 5-year US Treasury yield, which was at the center of the turmoil, fell 0.03 percentage points on Monday. The 5-year yield was flat at 0.695 percent in Asia on Tuesday, as was the 10-year yield at 1.419 percent. Bond yields fall as prices rise.
“While it may be tempting to conclude that the stock market is getting used to higher returns, it also means that it removes one of the barriers to further higher returns,” said Robert Carnell, head of Asia-Pacific research at ING. . “What would undermine an uptrend in bond yields would be a major collapse in risk appetite.”
Australian bond yields rose after the Reserve Bank of Australia kept its cash rate target at a record 0.1%, with the 10-year yield rising 0.05 percentage points to 1.703%. This follows a drop of nearly 0.25 percentage points on Monday after the RBA doubled the size of its regular long-term bond purchases as borrowing costs skyrocketed.
“Australia has shown strong external resilience despite increasing trade tensions with China, the Covid pandemic and earlier after the global trade slowdown caused by Trump-era tariffs,” said Josh Williamson, chief economist of Australia at Citigroup, who recently improved the forecast for fourth-quarter growth to stand at 2.9%.
In commodities markets, oil prices continued to decline ahead of an Opec + meeting this week that could lead to increased supply. Brent, the international benchmark, fell 1.1% to $ 62.99 a barrel while West Texas Intermediate, the US marker, fell roughly the same amount to $ 59.99.