Hang Seng Index Gains on Tech Support While Real Estate Stocks Tumble

US Markets Steady After Tuesday’s Tech Stock Rout

On Wednesday, October 16, US Equity Markets partially recovered their losses from Tuesday’s tech sector-fueled sell-off. The Dow advanced by 0.79%, while the Nasdaq Composite Index and the S&P 500 saw gains of 0.28% and 0.47%, respectively.

Investors reacted to Morgan Stanley’s (MS) earnings and upbeat forecasts from US airlines.

The US equity market gains set the tone for the Thursday morning Asian session.

Fed Rate Path Remains Market Friendly

Investors remained focused on the Fed rate path. Expectations for a 25-basis point November Fed rate cut supported demand for riskier assets. According to the CME FedWatch Tool, the chances of a 25-basis point Fed rate cut eased from 97.0% (October 15) to 92.1% (October 16). Additionally, the probability of a 25-basis point Fed rate cut in December stood at 84.3%.

Recent US economic data has bolstered investor expectations of a soft US economic landing. Fed rate cuts and a soft landing paint a positive picture for riskier assets.

China Announces Fresh Measures to Bolster Housing Sector

On Thursday, October 17, CN Wire reported updates from China, with government officials announcing fresh measures aimed at bolstering the housing market. According to CN Wire,

“Housing Minister Ni also said all residential property projects will be included in that white list program to receive loan support. Benefits of the white list mechanism are, according to officials, property management becoming more standardized and financing faster. It can also protect the legitimate rights of homebuyers.”

Additionally, the People’s Bank of China’s Deputy Governor said the majority of current mortgage loan interest rates will be modified by October 25, done by October 30. Existing mortgage rate cuts account for 90% of current mortgages.

However, there were no fiscal stimulus measures directly targeting domestic consumption. Real estate stock price trends showed investor disappointment with the announcements.

Expert Views on China’s Stimulus Measures

Natixis Asia Economist Alicia Garcia Herrero suggested possible announcements in today’s press conference, including,

• Lower down payments.
• State-funded acquisition of unsold housing.
• Pushing whitelist bank lending to distressed developers.
• Allowing local governments to issue special-purpose bonds to fund land buybacks.

Hang Seng Index and Mainland China Equities Gain

Turning to the Asian equity markets, the Hang Seng Index advanced by 0.98% in the morning session. Tech stocks contributed to the gains, with the Hang Seng Tech Index gaining 1.61%. Notable tech stock movers included Alibaba (9988) and Baidu (9888), which rallied by 2.78% and 2.02%, respectively.

However, the Hang Seng Mainland Properties Index was down 3.46%, reflecting disappointment with this morning’s press conference.

Mainland China’s equity markets advanced over hopes of fresh stimulus aimed at boosting consumption. The CSI 300 and Shanghai Composite advanced by 0.85% and 0.77%, respectively.

Nikkei Extends its Losses from Wednesday

In contrast, the Nikkei Index was down 0.50% on Thursday morning. A weaker USD/JPY pair contributed to the Nikkei’s downside, with tech stocks extending their losses from Wednesday.

Japan’s latest trade data likely impacted buyer demand for Nikkei Index-listed stocks. Exports unexpectedly declined by 1.7% year-on-year in September, signaling weak demand. The weaker data dampened bets on a Q4 2024 BoJ rate hike.

Tokyo Electron (8035) and Softbank Group Corp. (9984) fell by 2.65% and 0.32%, respectively.

ASX 200 Advances Despite Tighter Labor Market

On Thursday, the ASX 200 Index gained 0.86%, though it eased back from a new high of 8,385. Investors reacted to better-than-expected Aussie labor market data that eased bets on a Q4 2024 RBA rate cut. Banking stocks led the gains, with Westpac Banking Corp. (WBC) and National Australia Bank (NAB) rallied 2.05% and 1.20%, respectively.

However, the price for iron ore spot was down 3.17% on Thursday morning, impacted by the Chinese government’s press conference. The slump in iron ore prices reduced demand for mining stocks. BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) were down by 0.23% and 0.19%, respectively.

Looking Ahead

Investors should remain alert, with stimulus news from Beijing and central bank commentary requiring consideration. USD/JPY trends will continue to direct the Nikkei Index, while the US futures may affect broader market sentiment.