Monday, September 26, 2022

China’s Warnings Weigh On Asian Equities

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Asian equities soft after mixed US session

Wall Street finished on a slightly negative note after softer than expected US data. That saw some rotational flows out of cyclical, and tech with the falling 0.19% while the edged 0.06% higher and the fell by 0.29%. The selling pressure was limited by the fall in US yields providing some peripheral support.

US futures on all three indexes have risen in Asia by around 0.20%, but that has not been enough to stop Asian markets from falling into the red. The rise in COVID-19 cases and their geographical spread in mainland China is clearly spooking local investors today. That sees the falling by 0.85%, with the clinging to unchanged.

COVID-19 aside, the situation on the ground got murkier in China this morning, with the Economic Information Daily likening online gaming to “spiritual opium,” cue Tencent (NYSE:) shares and others being sold heavily. After the last few weeks, even oblique warnings from authorities are ignored at your peril, and it seems that regulatory risk is alive and well in China still.

The mainland’s was unchanged, but the more tech-weighted fell by 0.60%, while the dropped by 1.0%. After that article, the modest scope of the falls has me thinking that China’s “national team” might be “smoothing” today.

was down 0.85%, with off 0.30%, while rose by 0.40%. and were flat, with Australia’s down 0.20% and the down 0.35%.

Europe is likely to take its cue from the rise in US futures this morning and start the day slightly positive. Only a spiraling COVID-19 caseload in Mainland China would likely spill over onto European markets, which has mostly ignored the China clampdown ructions so far.

Yesterday we saw international investors piling into mainland stocks via the Hong Kong/Shanghai connect pipeline. The story mentioned above proves that bargain hunting in China remains fraught with risk still.

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