Economic jitters as Asian markets decline amid concerns over Chinese markets

Asian shares fell on Tuesday, with Hong Kong’s benchmark down nearly 2%, as concerns over Chinese markets contributed to heavy selling.

Asian markets experienced a significant downturn on Tuesday, with Hong Kong’s benchmark leading the decline with a nearly 2% drop. Investors grappled with concerns over Chinese markets, contributing to a lack of confidence across the region. The absence of cues from overnight trading in U.S. markets, closed on Monday, added to the uncertainty.

In Tokyo, the Nikkei 225 index fell by 0.79%, breaking its New Year’s winning streak and retreating from its highest level in 34 years to 35,619.18. The yen strengthened against the dollar, despite reports of the Bank of Japan preparing to end its longstanding negative interest rate policy.

The Hang Seng in Hong Kong shed 1.9%, and the Shanghai Composite index declined 0.6%. Investors exhibited a risk-off sentiment, particularly selling stocks in the technology and property sectors. Meituan, an online food delivery company, dropped 3.2%, and Tencent, a games company, lost 2.7%. Financially troubled property developers like China Garden Holding and Sino-Ocean Group Holding faced significant declines of 5.6% and 8.1%, respectively.

The upcoming economic update from China on Wednesday is highly anticipated, with economists forecasting annual growth at 5.3% in the last quarter, a slight increase from 4.9% in July-September. However, concerns persist over a potential significant decline in growth rates below 4%, as warned by IMF head Kristalina Georgieva. China continues to grapple with a crisis in its property sector and subdued consumer demand.

Elsewhere in Asia, South Korea’s Kospi slipped 0.7%, and Australia’s S&P/ASX 200 gave up 1.2%. European markets also had a downbeat start to the week, with Germany’s DAX losing 0.5%, the CAC 40 in Paris down 0.7%, and Britain’s FTSE 100 shedding 0.4%.

In the U.S., stocks have been on a bullish trajectory, approaching record levels. The S&P 500 is within 0.3% of its all-time high, driven by optimism that inflation is cooling, potentially leading the Federal Reserve to cut interest rates multiple times this year. Traders are actively speculating on the Fed’s policy, expecting a more aggressive approach than what the central bank has indicated.

Commodity markets saw mixed movements, with benchmark U.S. crude oil losing 11 cents to $72.57, and Brent crude advancing 14 cents to $78.29 per barrel. The euro fell to $1.0916 from $1.0952, reflecting the prevailing market sentiment.

Investors are closely monitoring developments, particularly in Chinese markets, for signals on the trajectory of global economic recovery and central bank policies. The current volatility underscores the delicate balance between economic revival and lingering uncertainties.