Asian markets fell sharply Monday after China reported weaker-than-expected economic growth and industrial production, leading investors to reassess the outlook for the region’s largest economy.
The sluggish Chinese economic indicators added to the selling pressure in markets already weighed by a strong rebound in the yen, as well as a commodity-price slump and weak cues from Wall Street on Friday.
The Shanghai Composite slid 0.8%, and Hong Kong’s Hang Seng Index gave up 1.3% after figures showing the Chinese economy expanded 7.7% in the first quarter, compared to the year-earlier period.
The slowdown followed a 7.9% expansion in the fourth quarter and was weaker than the 8% growth anticipated by economists. Industrial output for March, at 8.9% from the year-ago month, was also weaker than projected.
“The official ‘target’ for GDP this year is 7.5%, so this print remains on track from that perspective, but consensus expectations for 8% to 8.5% may need to reconsider their positions. Expectations for [People’s Bank of China] policy-tightening by year-end needs to be shelved for now,” said TD Securities head of Asia-Pacific research Annette Beacher.
Stock indexes in other regional markets that count China as a key trading partner also extended early losses.
Japan’s Nikkei Stock Average dropped 1.2%, Australia’s S&P/ASX 200 lost 1.3%, South Korea’s Kospi shed 0.5%, and Taiwan’s Taiex gave up 0.4%.
“2013 is starting to look eerily like 2012. … Another year of propped-up growth via state spending and a credit deluge would, we fear, push China dangerously close to proving [former premier] Wen Jiabao correct — that the current economic model is ‘unsustainable,’” economists at IHS Global Insight led by Alistair Thornton wrote to clients.
“There is plenty more downside risk out there than upside risk. We have lost confidence in a robust recovery,” they said.
A number of Chinese stocks fell sharply on disappointment over the economic data.
Sany Heavy Industry Co. lost 2.7%, Ping An Insurance Group Co. dropped 1.5%, and Great Wall Motor gave up 2.2% in Shanghai trading.
In Shenzhen, Zoomlion Heavy Industry Science and Technology Co. dropped 4.9% — also weighed by a profit warning issued Friday — and Chongqing Changan Automobile Co. shed 2.3%.
In Hong Kong, Industrial & Commercial Bank of China Ltd. retreated 1.5%, and footwear maker Belle International Holdings Ltd. gave up 2.2%.
Monday’s drop in Japanese equity markets came after the U.S. Treasury on Friday warned Japan not to actively weaken its currency. The yen rebounded sharply after the remarks, with the U.S. dollar dropping below ¥98.20 on Monday, versus ¥98.92 in the U.S. late on Friday.
“Currency wars are back on the agenda as U.S. and Europe ‘remind Japan of its pledge not to drive down its currency,’” said Evan Lucas a market strategist at IG Markets. “The inverse correlation between the yen/Nikkei [Average] is almost ironclad, and will add to the downward pressure regionally.”
In Tokyo trading, Honda Motor Co. gave up 1.5%, Hitachi Ltd. shed 1.9%, and Bridgestone Corp. retreated 2% on the local currency’s rise.
On the upside, a report Saturday in the Nikkei business daily that Sharp Corp. would unload its more than 9% stake in Pioneer Corp. helped lift both firms’ shares significantly, with Pioneer stock jumping 6.2%, and Sharp soaring 14%.
Commodity stocks in the region suffered particularly hard Monday after gold futures slumped to hit their lowest level in 21 months in the U.S. on Friday, accompanied by declines in other commodities.
BHP Billiton Ltd. skidded 4.5%, and Newcrest Mining Ltd. plunged 8.3% in Sydney.
Back in Tokyo, steel maker JFE Holdings Inc. stumbled 3.8%, while in Seoul, Korea Zinc Co. tumbled 13.3%.
In Hong Kong, oil major Cnooc Ltd. lost 4.3%, and Zhaojin Mining Industry Co. gave up 8.3%, and in Shanghai, Zijin Mining Industry Co. fell 5%, and Jiangxi Copper Co. tanked by 3.8%.
Marketwatch
