Mainland Chinese stocks led the regional declines on Wednesday, following disappointing economic indicators and Beijing’s reluctance to implement additional stimulus measures. The benchmark CSI 300 Index initially plummeted by 5.1% just after the market opened but managed to recover some losses later in the session. This drop erased many of the gains from the previous day when stocks surged following the end of the Golden Week holiday. Meanwhile, shares in Hong Kong exhibited volatility after experiencing their largest single-day decline in 16 years on Tuesday. US equity futures also fell amid reports suggesting regulators might consider breaking up Google.
Investor anxiety grew regarding the effectiveness of the recent stimulus measures to support a lasting recovery in the equity market. Chinese tourists spent less during the extended holiday period, and comments from Premier Li Qiang emphasized the need for policies aimed at stabilizing growth and expectations, indicating Beijing’s efforts to rebuild investor confidence.
China’s National Development and Reform Commission (NDRC) announced the acceleration of 200 billion yuan ($28 billion) in spending from next year’s budget. This announcement fell short of analysts’ expectations for a more substantial fiscal package potentially worth up to 3 trillion yuan.
Alicia Garcia Herrero, Asia Pacific chief economist at Natixis SA, criticized the NDRC’s announcement, stating, “I don’t know what the chairman of the NDRC was thinking with this. The longer they wait to clarify, the more it becomes evident that there’s no fiscal backing to this stimulus — it’s all monetary, simply propping up stocks. That’s quite dangerous.”
In related news, the New Zealand dollar and bond yields declined following the Reserve Bank of New Zealand’s decision to cut its benchmark interest rate by 50 basis points for the second consecutive time, reflecting growing concerns about an economic slowdown.
Meanwhile, India is set to announce its own interest rate decision later today, and South Korea will officially join FTSE Russell’s benchmark bond index, marking the culmination of months of advocacy and significant enhancements to its financial market infrastructure.
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