Shares in Asia-Pacific fell after China’s banking regulator expressed concern about bubbles in foreign markets, a day after Wall Street achieved its best performance in nearly nine months.
Hong Kong’s benchmark Hang Seng index fell 1.6 percent on Tuesday, reversing initial gains, while China’s CSI 300 index of Shanghai and Shenzhen-listed stocks rose 2 percent and Australian S&P / ASX 200 fell by 0.4 percent.
Enthusiasm for US equities also increased following the comments of the Chinese regulator, with futures contracts dropping the S&P 500 to fall 0.3 percent when trading on Wall Street began. The FTSE 100 would lose 0.2 percent.
“I am concerned that the bubble problem in foreign financial markets will one day appear,” Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, told local media during a briefing in Beijing. He pointed to gains in the US and European markets made possible by ultra-loose monetary policy, which he said had ‘seriously deviated from the real economy’.
“The Chinese market is now strongly linked to foreign markets and foreign capital is still pouring in,” Guo said, according to China’s state-backed Securities Times, in a nod to global investors’ appetite for Chinese stocks and bonds. He added that while China can handle the scale and speed of inflows, ‘we need to [China’s] domestic financial market becomes too large ”.
Japan’s Topix fell 0.4 percent, dampened by finalized data showing that capital spending fell nearly 5 percent from a year ago in the fourth quarter. This was a sharp departure from a reading that showed a rise of 4.5 percent and raised questions about the strength of the economic recovery in the country.
The moves in Asia follow a banner session for Wall Street, which concludes with a 2.4 percent rise for the S&P 500 and a 3 percent rally for the Nasdaq that focuses on technology.
These gains came when the government debt markets expanded their setback after last week’s sell-off. Yields on the five-year U.S. Treasury, which was in the midst of the turmoil, fell 0.03 percentage points on Monday. The five-year yield on Tuesday was 0.695 percent in Asia, as well as the ten-year yield at 1,419 percent. Bond yields fall as prices rise.
“While it may be tempting to conclude that the stock market is getting used to higher returns, it also means that it removes one of the barriers to the returns moving further,” said Robert Carnell, head of research on the Asia-Pacific at ING said. . “What would undermine a rising trend in bond yields would be a major collapse in risk appetite.”
Australian bond yields increased after the Reserve Bank of Australia kept its cash rate target at a record low of 0.1 per cent, with the 10-year yield rising 0.05 percentage points to 1,703 per cent. This followed a tumble of almost 0.25 percentage points on Monday after the RBA doubled the size of its usual long-term bond purchases as borrowing costs rose.
“Australia has shown strong external resilience despite an increase in trade tensions with China, the Covid pandemic and earlier as a result of the downturn in global trade designed by Trump-era tariffs,” said Josh Williamson, chief economist at Australia at Citigroup, which recently upgraded the country. growth forecast for the fourth quarter to 2.9 percent.
In commodity markets, oil prices continued to fall ahead of an Opec + meeting this week that could see an increase in supply. Brent crude, the international benchmark, fell 1.1 percent to $ 62.99 a barrel, while West Texas Intermediate, the U.S. market, fell by about the same amount to $ 59.99.