Asian markets mostly down, Shanghai cheered by tax cuts plan

HONG KONG (AFP) – Most Asian markets retreated yesterday as investors awaited fresh developments in the China-United States (US) trade talks, though Shanghai ended sharply higher as China unveiled massive tax cuts to support the stuttering economy.

Wall Street provided a negative lead as optimism that the world’s top two economies are heading for a tariffs deal was replaced by a need for clarity on any agreement.

Shares have enjoyed a blockbuster start to the year so far, but “trade optimism could only take the stock market so far,” said OANDA Senior Market Analyst Alfonso Esparza.

“High-level talks between the two largest economies have been ongoing and although they appear close to bearing fruit, the fact remains that the optimism has already been priced in,” he added. “Details on the agreement will be needed to unlock gains.”

Tokyo ended 0.4 per cent lower, Sydney eased 0.3 per cent, Singapore and Seoul were each 0.5 per cent off and Taipei dropped 0.4 per cent. Manila and Bangkok were also down. But Shanghai jumped 0.9 per cent while Hong Kong inched up after China announced hundreds of billions of dollars worth of tax cuts for firms to stimulate the economy.

Currency traders watch monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea. – AP

Beijing will also increase spending, with the targetted fiscal deficit set to increase to 2.8 per cent of GDP, from 2.6 per cent last year, while the National People’s Congress is expected to pass laws next week regulating foreign investment in a move that could help ease US trade tensions.

However, it did reveal a target of 6.0-6.5 per cent growth for this year – below the last year’s final 6.6 per cent – which was the slowest for three decades, as the leadership struggles to address a mounting debt crisis as well as the trade row.

In a speech at the opening of China’s annual Parliament, Premier Li Keqiang warned the country “will face a graver and more complicated environment as well as risks and challenges, foreseeable and otherwise, that are greater in number and size”.

“We must be fully prepared for a tough struggle.”

However, Asia-Pacific Chief Market Strategist at JP Morgan Asset Management Tai Hui said the latest target indicated the leadership had learned from the past.

It “reflects top officials’ maturity in accepting that China needs to stabilise growth in a sustainable manner, instead of a rush of liquidity to the economy, as we saw in previous downturns,” he said.

“They need to strike a balance between boosting economic activity and not restart another debt-fuelled boom. It would be unrealistic to expect 2019 to be stronger than 2018 considering global headwinds and some structural challenges in the Chinese economy.”

Shares in Mumbai rose slightly while the rupee also made slight gains despite news that the US had cancelled its preferential trade status, saying it had failed to allow required market access.

However, New Delhi said the impact on its exports to the world’s biggest economy would be limited.

In early trade London rose 0.1 per cent, Paris was flat and Frankfurt dipped 0.2 per cent.