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Asian markets fall on China growth concerns

HONG KONG (AFP) – Asian stocks retreated yesterday on concerns over the impact of China’s COVID-19 restrictions on the world’s second-largest economy as investment banks slashed growth forecasts.

A strong rally on Wall Street, where the Dow closed 2.0 per cent higher, did not carry over to Asia, and Beijing’s announcement of a fresh raft of measures to stimulate the economy did little to calm nerves.

The package announced on Monday includes more than CNY140 billion (USD21 billion) in additional tax rebates, bringing the total amount of tax relief this year to CNY2.64 trillion, Xinhua news agency reported following a meeting of the State Council chaired by Premier Li Keqiang.

China’s economy has taken a hit from Beijing’s zero-COVID approach to the pandemic, which has resulted in lengthy lockdowns of major cities and mass testing of millions of people.

Prolonged virus lockdowns have constricted supply chains, dampened demand and stalled manufacturing. Investment banks UBS Group and JPMorgan Chase cut their China economic growth forecasts due to the impact of the coronavirus strategy.

UBS yesterday cut its 2022 GDP growth forecast to 3.0 per cent from 4.2 per cent while JPMorgan on Monday trimmed its forecast to 3.7 per cent from 4.3 per cent, Bloomberg News reported.

A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea yesterday. PHOTO: AP

“The lingering restrictions and lack of clarity on an exit strategy from the current COVID policy will likely dampen corporate and consumer confidence and hinder the release of pent-up demand,” UBS economists including Tao Wang wrote in a research note, according to Bloomberg.

China has targetted full-year growth of around 5.5 per cent, but data published in April showed that first-quarter growth slowed to 4.8 per cent after its economy lost steam in the latter half of last year.

Concerns over the economic fallout from China’s dogged pursuit of a zero-COVID approach and its knock-on impact on supply chains and the wider global economy spooked investors, with Asian markets well into the red yesterday.

Tokyo lost 0.9 per cent and Shanghai closed 2.4 per cent lower while Hong Kong slipped 1.8 per cent.

Seoul dropped 1.6 per cent, while Taipei, Sydney, Singapore, Bangkok, Kuala Lumpur and Manila were all lower. Jakarta was the sole Asian market in the green.

The sell-off continued in Europe, with London down 0.8 per cent, Frankfurt off 0.9 per cent, and Paris 1.3 per cent lower.

Later in the week, investors will be eyeing the minutes from the latest Federal Reserve rate-setting meeting for clues about further hikes aimed at reining in inflation. A raft of economic figures will also provide insights into the state of the United States (US) economy.

“The contradictory signals pouring into markets from all directions mean we can expect to see plenty of volatility across asset classes in the weeks ahead, even if we don’t get a thematic directional move,” said OANDA Senior Market Analyst Jeffrey Halley.