The MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.04%, Hong Kong benchmark lost 2.28%, Chinese blue chips shed 2.4%, Kospi declined 0.92%, Nikkei fell 0.87%
Shares in Asia closed the week heading for their lowest finish since November and worst week since February, dragged down by losses in China and extending the sharp declines a day earlier.
Meanwhile the dollar held onto its recent gains staying at a nine-month high, as traders continued to seek safety in turbulent markets amid fears of slowing growth and a potential easing in U.S. stimulus.
The MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.04%, down 4.8% on the week, its worst week since February.
The Hong Kong benchmark hit its lowest this year, and was last down 2.28% while Chinese blue chips dropped 2.4%.
There are several reasons for the declines, but the main thing is the ongoing regulatory risk. Markets are reacting sharply to regulatory changes or any suggestions in state media that they might be coming, said Gary Ng, an economist at Natixis in Hong Kong, pointing as an example to falls in alcohol stocks, which are rumoured to be in the authorities’ sights.
Hong Kong’s tech sub index declined 3.57% as state media said China’s National People’s Congress on Friday officially passed a law designed to protect online user data privacy, which is expected to add more compliance requirements for companies in the country.
Stocks in a number of sectors, ranging from property to education have smashed due to recent regulatory crackdowns.
South Korea’s Kospi was down 0.92%, set for its worst week in seven months.
Japan’s Nikkei shed 0.87% to a seven-month low.
Apart from China, markets are also concerned about slowing growth in Asia amid the spread of Delta variant of the coronavirus, and also the potential for the US to begin shrinking its monetary stimulus.
Fan Cheuk Wan, HSBC’s Asia chief investment officer for private banking and wealth management, said markets were now starting to look to for policy responses from Asian governments, both in terms of speeding up vaccination roll outs and policy support from to mitigate the growth risk.
The Chinese government will likely roll out more measures such as targeted reserve requirement ratio cuts or tax relief or subsidies for small and medium enterprises, she said, though noted they would likely avoid broad based easing through interest rate cuts.
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