Chinese Markets Lose Steam
Chinese stock markets, including the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes, experienced slight declines on Friday after a rebound rally. Earlier in the week, the People’s Bank of China unexpectedly cut the reserve requirement ratio, injecting 2 trillion yuan ($140 billion) in liquidity. The two indexes were still on track for their best weekly performance since July 2023, with gains of more than 2% each.
Hong Kong Hang Seng Dips
Hong Kong’s Hang Seng index fell 0.3%, largely influenced by a price target cut by Citibank on Tencent Holdings Ltd (HK:0700). Citibank warned about a potential slowdown in China’s video game industry impacting Tencent’s revenue. Despite the dip, the Hang Seng was on pace to add over 5% for the week, rebounding from a 15-month low.
Concerns about Chinese Economic Support
Analysts raised doubts about the effectiveness of further monetary stimulus in stimulating the Chinese economy. Consumer and business spending in the country remained weak, and business activity did not witness significant improvement throughout the past year. The upcoming release of the Purchasing Managers Index data for January is expected to provide more insight into the state of business activity at the start of the new year.
Japanese Shares Weaken
Japan’s Nikkei 225 index was the biggest loser of the day, declining 0.9%, while the broader TOPIX index lost 0.8%. Both indexes saw profit-taking after reaching 34-year highs earlier in the week. The weakening of Japanese shares was driven by hints of a less dovish monetary policy by the Bank of Japan, particularly Governor Kazuo Ueda’s comments. Ueda suggested that the bank’s ultra-low interest rates could come to an end as inflation inched closer to the 2% target. Soft inflation data from Tokyo added to this idea.
Southeast Asian Stocks Experience Losses
Stock markets in Southeast Asia recorded steep declines, with Indonesian markets leading with a 1% drop. Conversely, South Korea’s KOSPI surged over 1%, bouncing back from a two-month low earlier in January. Indian and Australian markets were closed for the day.
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