Read for 5 minutes Reuters, HONG KONG, July 6 – On Tuesday, Asian stock markets were tumultuous after Australia’s central bank hinted at some tapering of its quantitative easing program, while concerns over China’s powerhouse technology sector weighed on equities. Due to the United States’ Independence Day vacation, markets were closed on Monday, leaving the Asian area without a substantial lead heading into trade on Tuesday. Outside of Japan, MSCI’s broadest index of Asia-Pacific stocks was down 0.1 percent. The Hang Seng Index in Hong Kong was down 0.44 percent for the sixth day in a row, while China’s CSI300 was down roughly 0.6 percent to a nearly two-month low. “Equities in Asia will continue to grind higher, but Hong Kong and China have been bumpy for the past few days, and I believe China will remain weaker than the rest of Asia,” said Suresh Tantia, senior investment strategist at Credit Suisse. “China is still changing… policy is tightening and tech regulation is expanding, which will put pressure on the market.” The Nikkei 225 index in Japan was up 0.3 percent, while the S&P ASX200’s optimistic tone earlier Tuesday was reversed following the RBA’s decision to keep interest rates on hold. After trading up as high as 0.21 percent in the morning session, the ASX200 was down about 0.3 percent. The Kospi 200 Index in South Korea increased 0.42 percent in the afternoon. On Tuesday, Chinese technology stocks remained under scrutiny as the Chinese Cyberspace Administration requested a probe into Didi Global Holdings, which had just recently listed on the New York Stock Exchange. “There is still residual uncertainty from China’s tech businesses, and they are significant in the Asian market, so it might be a cloud for market mood,” Tai Hui, chief Asia market strategist at JPMorgan Asset Management, said. “The tech industry is really important in Asia, and we aren’t going to have a lot of clarity on regulatory adjustments in China for the next several weeks or months, and (that) will be a major market driver.” Xiaomi Corp mandated 12 banks on Tuesday to lead a potential US dollar debt issue, which may put investor appetite for Chinese tech companies to the test. The likelihood of greater mergers and acquisitions activity in Australia has been raised following the announcement on Monday of a $16.7 billion bid for Sydney Airport Holdings Ltd by a pension fund consortium. Karen Jorritsma, head of equities at RBC Capital Markets in Sydney, told Reuters, “Sentiment appears to have almost gone past the (economic) reopening trade and into the forecast for corporate earnings that are coming up in August.” “The (earnings) season has been exceptionally good overall, and with balance sheets in such fantastic shape, the tide is turning toward M&A possibility.” The Reserve Bank of Australia held the official cash rate on hold at a record low of only 0.1 percent, indicating that it would likely remain there until 2024, but investors were more interested in the bank’s plans to reduce support. The bank stated that it would continue to buy government bonds at a weekly rate of A$4 billion, rather than the current A$5 billion, past the current September deadline until at least mid-November. The RBA speech was less positive than expected, according to Commonwealth Bank strategists, prompting a 5 basis point gain in 10-year government bonds. Investors around the world are eagerly awaiting the release of the Federal Open Markets Committee minutes for June from the United States Federal Reserve, which will provide insight into whether ongoing emergency stimulus measures will begin to be curtailed. Despite a surge in the Brent crude price to above $77 a barrel, the highest level since October 2018, many European markets were bullish overnight. The increase comes as OPEC+ ministers called off talks on Monday following a fight last week in which the United Arab Emirates rejected a proposed eight-month extension to output limitations, implying that no deal to expand supply had been reached. The next meeting of OPEC+ countries – the Organization of Petroleum Exporting Countries (OPEC) and allied producers, including Russia – has yet to be scheduled, although sources told Reuters that new conversations might start in the coming days. Increased oil costs are fueling fears that a greater global inflation rate could sabotage the post-coronavirus pandemic recovery that is already underway in certain major international economies. Scott Murdoch reported from Hong Kong, and Kenneth Maxwell and Raju Gopalakrishnan edited the piece./n
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