REGIONAL MARKETS
Asian markets hit by profit taking and more weak China data
Hong Kong led a selloff across Asian markets Monday as profit takers moved in following a six day rally while dealers were also spooked by another disappointing batch of weak economic data out of China.
With few catalysts to drive buying, equities were ripe for selling after last week’s healthy gains with the US government shutdown – now in its fourth week and showing no sign of ending soon – instilling a sense of unease.
Also on the agenda is Tuesday’s key Brexit vote with British Prime Minister Theresa May making an eleventh hour appeal to MPs to pass her agreement with the EU, which is expected to be voted down by a wide margin.
In afternoon trade, Hong Kong shed 1.6 percent after chalking up gains of more than six percent over the previous six trading days while Shanghai ended down 0.7 percent and Singapore lost 0.5 percent.
Taipei was 0.5 percent lower, Mumbai lost 0.8 percent and Jakarta shed 0.9 percent.
Sydney was marginally lower but Wellington and Manila rose while Tokyo was closed for a holiday.
The losses follow a negative lead from Wall Street where all three main indexes fell Friday, ending a healthy week that had been boosted by optimism that China and the US are edging towards a trade deal, while the Federal Reserve indicated it could pause its interest rate hikes.
Trifecta Consultants analyst Sukrit Vijayakar said the “optimism surrounding the US-China trade talks faded,” noting that statements from both sides were positive but vague and “lacked concrete details.”
Data Monday showed China’s imports and exports fell last month, signalling that the US tariffs are beginning to bite in the world’s number two economy. The Customs bureau also said China’s trade surplus with the US – a major source of anger for President Donald Trump – widened 17.2 percent last year.
“China’s weaker than expected 2018 trade data has seen the China equity market dive lower. Then, sentiment went deeper into the tank on the release of China December trade data, which missed the mark badly,” said Stephen Innes, head of Asia-Pacific trade at OANDA.
There are growing concerns that the partial government shutdown of the US government, which has seen hundreds of thousands of federal workers go unpaid, could also impact the world’s number one economy.
With Democrats refusing to give in to Trump’s demands for cash to pay for a Mexican border wall, there is no end in sight in the row, which Standard & Poor’s estimates has already cost the US more than US$ 3 billion.
Markets may “pay increased attention to this issue as those numbers are not small potatoes,” Innes said.
Dealers are now looking at the company reporting season, which starts in earnest this week, with some fears of weak results as the global economy shows signs of slowing.
The tech sector will be closely scrutinised after Apple earlier this month lowered its revenue forecasts for the key December quarter while rival Samsung flagged a near 30 percent drop in operating profit.
On currency markets, the pound is holding up despite May’s expected defeat in Tuesday’s vote with lawmakers across all parties against her deal.
The opposition Labour Party is suggesting it will seek a no confidence vote in the government soon afterwards, which could fan further uncertainty and possibly lead to another general election.