China equities get crushed

The plunge in China equities dominated Asian markets after the government further tightened its crackdown on Tencent and completely torpedoed the multi-billion student tuition sector over the weekend. Although Wall Street closed at record highs on Friday, lifting early trading in Asia, regional markets turned south after China opened.

Only the Nikkei 225 has risen today, climbing 1.05% and seemingly piggybacking the robust New York close, with the uneventful start to the Olympics lifting sentiment. The Kospi, meanwhile, has fallen by 0.50%, with Taipei dropping by 0.65%.

China markets are under siege, with the Shanghai Composite plunging 2.20% and the CSI 300 2.30%. Hong Kong, replete with China tech listings, has plunged by 2.90%, with talk of tightening local government financing adding to the credit concerns in Hong Kong-listed property developers as well. With China’s government seemingly ambivalent to stock market ructions, something that surprise precisely nobody, mainland China and Hong Kong markets are set to suffer a repricing by investors globally of their risk premia this week.

One beneficiary of today’s China turmoil appears to be Bitcoin and Ethereum. Bitcoin is 8.35% higher at USD 38,400, and it appears that some defensive rotation, probably from mainland investors, is occurring.

Across Asia, Singapore has fallen 0.55%, with Kuala Lumpur down 0.30% and Manila down 1.10%. Jakarta has bucked the trend to be up 0.30%, while Bangkok markets are closed today. Australian markets are treading water between China concerns and a resplendent Wall Street. The ASX 200 and All Ordinaries are unchanged for the day.

US index futures are also lower this morning, notably the Dow Jones, with its higher beta to world growth. China nerves have sent it 0.40% lower, while the S&P and Nasdaq futures are 0.20% lower. European stocks are likely to open cautiously this afternoon, notably countries such as Germany, with high exposure to the China growth story. However, US markets are set to remain insulated, with US tech earnings and the FOMC the main points of influence on Wall Street this week.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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