China Stocks Lose Steam On Lack Of Big Bang Fiscal Measures: Asia Markets Wrap

Stocks in Mainland China gave up early gains as investors were disappointed by the lack of any anticipated big measures to revive the economy, raising concerns if the bull run will be sustained.

However, stocks in Japan, South Korea, and other Asian countries slipped in trade on Tuesday, taking cues from an overnight decline on Wall Street amid geopolitical tensions.

China's benchmark equity index—CSI 300—jumped as much as 11% during opening. The index was up 5.9% at 4,258 as of 8:39 a.m. Meanwhile, China stocks in Hong Kong fell 10%, the worst since 2008.

The Japanese benchmark Nikkei 225 was 560 points, or 1.39% lower at 38,860, while Australia's S&P ASX 200 was down 0.23% at 8,185.

Stocks in China were poised for a frantic trade as markets reopened after a long holiday when the country's top leaders held a briefing to discuss policies aimed at boosting economic growth. However, it held back in unleashing more stimulus while promising further support for growth.

The country’s economic planning agency, National Development and Reform Commission, said they would speed up spending while largely reiterating plans to boost investment. They would continue to issue ultra-long sovereign bonds next year to support major projects and invest 100 billion yuan ($14 million) on key strategic areas.

Unlike the reopening rally in 2022–23, which was short-lived owing to lacklustre fundamentals, the bull run will be sustained, Citi said in a note. "This time round, we think it would hinge on the follow-up stimulus and real policy impact for the current rally to extend beyond the Golden Week and further."

The past week has seen strong bullish flows, which established an extended net long position in the China A50 index from net short earlier. This highlights the dramatic shift in sentiment for this market in a short space of time, Citi said.

China's CSI 300 is up over 22% from its September lows to enter a technical bull market, according to Bloomberg. This led China to regain the influence it lost for over 10 months in the MSCI Emerging Market index.

CLSA Ltd. reduced its exposure to Indian equities to accommodate its increased bet on the Chinese stock markets, as per a note issued by the global brokerage firm. "We raise China to 5% overweight by cutting our India overweight to 10% from 20%," it said.

Meanwhile, stocks in the US slipped as fears of an escalating war in West Asia kept traders nervous. Israel said it intercepted most of a barrage of rockets fired by Hamas and other Iran-backed groups, Bloomberg News reported. Amidst these tensions, Brent crude jumped above $80 a barrel.

Further, stocks on Wall Street fell amid growing expectations of a small rate cut in the November Fed meeting as solid job data cemented a soft landing for the economy. Treasuries in the US continued to drop, with the 10-year yield crossing 4%.

The S&P 500 and Nasdaq Composite tumbled 0.96% and 1.18%, respectively. The Dow Jones Industrial Average declined by 0.94%.

Brent crude was trading 0.05% lower at $80.89 a barrel as of 5:57 a.m. IST. West Texas Intermediate was down 0.05% at $77.10.