Asian equities markets dip ahead of FOMC

Asia stock markets fall pre-FOMC, China stabilises

US markets finished the overnight session lower despite blockbuster US tech results, as buy-the-rumour, sell-the-fact, and some pre-FOMC risk trimming took the wind out of Wall Street’s sails. The S&P 500 fell 0.47%, the Nasdaq retreated 1.21%, and the Dow Jones eased by 0.29%. US futures on all three are unchanged in slow Asian trade.

Most of Asia has contented itself to slavishly follow the US pre-FOMC risk reduction path, notably Japan, where the Nikkei 225 has fallen by 1.05%, while the Kospi is unchanged. China markets are bucking the trend after some torrid sessions this week, showing signs of stabilising today after reports emerged this morning that the central government might introduce some new fiscal stimulus in Q3. The Shanghai Composite is 0.40% lower, but the CSI 300 has risen 0.15%, and the Hang Seng has rallied by 1.0%.

Across the region, Singapore is down 0.20%, with Kuala Lumpur down 0.10%, while Taipei has fallen 1.40% as Apple signalled chip shortages with key products in their quarterly earnings release. Jakarta is unchanged, while Bangkok has declined 0.60%. Australian markets have followed Wall Street south, not helped by a 4-week extension of the Sydney lockdowns. The ASX 200 and All Ordinaries have both fallen 0.55%.

All eyes remain on China markets, with today’s slight recovery driven by the previously mentioned stimulus hopes and the China Securities Journal stating investors shouldn’t be worried about further stock price drops. Taken in totality, it implies that China’s “national team” may be getting ready to “stabilise” markets. It is doubtful, though, that the repricing of China equities for government regulatory risk has run its course, and the rally today should be approached with caution. However, the worst of the sell-off may be past markets for now.

Along with the rest of Asia, China markets will now be on hold for the FOMC tonight. If they stay on message and remain dovish, Asian equities, including China, could see a further recovery into the end of the week. However, the Hang Seng and CSI 300 will remain up by the stairs, down by the 5th-floor window market for some time.

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