Asian Stocks Drop as Wall Street Losses Continue

Asian stocks experienced significant declines on Friday, following losses on Wall Street the previous night. Chinese shares were particularly affected as the outcomes of a key legislative meeting did not meet expectations for substantial economic stimulus.

U.S. Market Overview

U.S. stock indexes closed lower as investors adjusted their positions ahead of an upcoming Federal Reserve meeting, anticipating a 25 basis point rate cut. Wall Street futures remained stable during Asian hours.

China Stocks Decline as CEWC Underwhelms on Stimulus

China’s Shanghai Composite fell 1.8%, and the Shanghai Shenzhen CSI 300 index saw a 2% decline. Hong Kong’s Hang Seng index dropped by 1.9%, underperforming its Asian counterparts.

Investors expressed disappointment over the lack of aggressive stimulus measures from China’s Central Economic Work Conference (CEWC), which ended Thursday. ANZ analysts noted that the conference felt like a recap of previous stimulus actions rather than introducing new support initiatives.

State media communicated that China would enhance its budget deficit, increase debt issuance, and ease monetary policies to ensure economic stability amid ongoing trade tensions with the U.S. However, markets doubted that these measures would offer the immediate boost necessary to combat deflationary trends.

The CEWC set economic growth targets, budget deficits, and debt issuance for the upcoming year, but specifics will only be disclosed during the annual parliament meeting in March.

Asia Shares Under Pressure Ahead of Fed and BOJ Meetings

Japan’s Nikkei 225 decreased by 1.3%, and TOPIX slipped 1.4% ahead of the Bank of Japan's policy meeting next week, where current interest rates are likely to be maintained as officials assess global risks and wage growth.

With the Fed meeting approaching, investors are cautious. While a 25 basis point interest rate drop is expected, the impact of higher-than-anticipated producer prices and stable consumer inflation complicates future rate outlooks.

Australia’s S&P/ASX 200 lost 0.7%, and Indonesia’s Jakarta Stock Exchange Composite Index fell by 0.3%. In contrast, South Korea’s KOSPI index gained 0.3% in anticipation of a parliamentary vote to impeach President Yoon Suk Yeol, following his controversial emergency measures earlier in December.

In other markets, India’s Nifty 50 Futures indicated a lackluster opening, while Malaysia’s FTSE Malaysia KLCI climbed by 0.3%.