Image credits - CNBCTV18
A wave of uncertainty washed over Asian markets on Friday, with worries about China’s weakening trade indicating a picture of slowing regional growth. The world’s second-largest economy, facing declining exports for the first time in seven years, cast a shadow over its neighbours, despite pockets of resilience like Japan’s record-breaking rally.
Hong Kong’s Hang Seng index took a tumble, plummeting 0.61%, while mainland China’s CSI 300 followed suit, closing 0.35% lower at 3,284.17. The gloomy sentiment stemmed from data showing China’s exports unexpectedly falling in December, despite beating analyst expectations.
The decline in exports mirrored sluggish domestic demand, further underscored by China’s consumer price index (CPI) falling for the fifth consecutive month. While the 0.3% drop in December beat the expected 0.4% decline, it still pointed towards an anaemic consumer market, another worrying sign for China’s economic well-being.
Beyond China’s woes, other regional markets felt the tremor. South Korea’s Kospi tumbled 0.9%, Taiwan’s Taiex shed 0.7%, and Australia’s S&P/ASX 200 dipped 0.3%. The pessimism seemed to permeate across the board, highlighting the interconnectedness of Asian economies and their dependence on China’s economic fortunes.
Nevertheless, a glimmer of optimism emerged amidst the prevailing challenges, exemplified by Japan’s outstanding performance. Both the benchmark Nikkei 225 and the broader Topix index soared to their highest levels since 1990, defying the regional downturn and extending their winning streak for the past week. This surge was fueled by a lot of factors, including optimism about Japan’s post-pandemic recovery, a weak yen boosting exporter earnings, and expectations of continued government stimulus measures.
Analysts pointed to Japan’s relative resilience compared to China, with its more diversified export base and stronger domestic consumption providing a buffer against external headwinds. Additionally, Japan’s recent policy shift towards a more proactive central bank and increased fiscal spending also fueled investor confidence.
The contrasting fortunes of China and Japan highlighted the uneven trajectory of Asian economies. While China’s slowdown raised concerns about a broader regional slump, Japan’s robust performance offered a glimmer of hope. The coming months will be crucial in determining whether China can navigate its trade woes and reignite domestic demand, or whether its sluggishness will drag down the entire region. Meanwhile, Japan’s continued ascent will be closely watched, as it could potentially decouple from its neighbours and chart its growth path.