Hong Kong Stocks Decline Amid Stimulus Disappointment

By Kevin Buckland

Overview

TOKYO (Reuters) – Hong Kong stocks led declines in Asia on Monday after Beijing's latest stimulus fell short of investor expectations, overshadowing Wall Street's record highs from Friday and futures pointing to further strength at the reopen.

Bitcoin climbed to an all-time high as Donald Trump's victory in the U.S. presidential election along with pro-crypto candidates being voted to Congress spurred expectations of a light-handed regulatory environment.

The dollar traded not far from last week's four-month peak versus major peers as traders prepared for a key reading of U.S. consumer inflation this week, as well as a parade of Federal Reserve speakers, including Chair Jerome Powell on Thursday.

Market Performance

• Hong Kong's Hang Seng tumbled 2.5% as of 0200 GMT, with a sub-index of mainland Chinese property shares tumbling 3.9%. Chinese blue chips weakened 0.3%.
• Japan's Nikkei fell 0.3%. South Korea's Kospi lost 0.9% and Taiwan's benchmark slipped 0.7%.
• Australia's share benchmark declined 0.4%, weighed down by commodity stocks, after oil and industrial metals weakened.

On Friday, after Chinese markets had closed, the National People's Congress Standing Committee unveiled a 10 trillion yuan ($1.39 trillion) debt package to ease local government financing strains and stabilize flagging economic growth. However, the stimulus steps lacked the direct injection of money into the economy that some investors had hoped for, particularly amid the looming threat of massive tariffs under the incoming Trump administration.

Analyst Insights

"It may be disappointing for those who were expecting the NPC meeting to approve a massive fiscal package, but the expectation is unrealistic, because the policy goal is to achieve the GDP growth target and reduce tail risks, not to reflate the economy in any meaningful way," Macquarie analysts wrote in a note.

"China's policy will also only respond to its own economic conditions, not the U.S. election result."

U.S. Market Influence

The stimulus disappointment overshadowed what should have been a positive lead from Wall Street, where the S&P 500 broke above 6,000 points for the first time before closing at a record slightly below that level. S&P 500 futures pointed 0.2% higher on Monday.

The Republican party is edging closer to sweeping both chambers of Congress, taking the Senate on election night and with Edison Research projecting it so far to have 214 seats of the 218 seats needed for control of the House, compared to 205 for Democrats. Investors expect that Trump's second term in office will bring equities-boosting tax cuts and looser regulations.

Bitcoin, which has been another prominent "Trump trade", extended its record run to mark a fresh all-time high of $81,756. Trump has pledged to make the United States "the crypto capital of the planet".

Currency and Commodities

The dollar index, which measures the currency against six major peers, held steady at 105.01 following Friday's 0.55% climb. Traders will be watching consumer price data on Wednesday for stickiness that could scupper the chances of an interest rate cut at the next meeting in December.

• The dollar rose 0.5% to 153.39 yen, reversing some of the weakness from Friday.
• Minutes of the Bank of Japan's October policy meetings showed officials were divided on how soon they could raise rates again, though market reaction was muted.
• The euro was flat at $1.0721, sitting not far from a four-month low. Political uncertainty remained a drag as German Chancellor Olaf Scholz expressed willingness to call a vote of confidence before Christmas.
• Gold declined 0.5% to $2,669.69 per ounce, dropping back further from last month's record high of $2,790.15.
• Base metals in Shanghai slipped, with copper falling 0.9% to 76,570 yuan a ton. Oil prices extended declines from Friday, with Brent futures dropping 0.3% to $73.68 a barrel.

($1 = 7.1787 Chinese yuan renminbi)