Asian markets head lower

Asia markets turn south

As it diverged from New York’s lead, the bottom fishing across Asia we saw yesterday has vanished today, with most of Asia in the red. President Xi’s wealth redistribution remarks and a taper-heavy FOMC minutes combining to push regional markets lower today. Xi outlined thoughts on what is described as “common prosperity”.

Against the background of China’s regulatory interventions and Chinese company’s rocky IPO environment at the moment, this will be another dark cloud for China equity prices. Eventually, Chinese equities will fall to levels that offset the multitude of governmental risks they now face. That process has not finished yet.

Overnight, Wall Street ended on a sour note post the minutes release. The S&P 500 and Dow Jones fell by 1.07%, while the Nasdaq retreated by 0.89%. Futures on all three indexes have continued easing this morning, lower by around 0.10%.

The Nikkei 225 starts the day 0.70% lower, while the Kospi has fallen by 1.0%. In China, the Shanghai Composite is down by 1.10%, with the CSI 300 slipping by 0.60%, and Hong Kong has lost 1.70%. Singapore is 1.05% lower, with Taipei falling 1.20%, Kuala Lumpur by 0.40%, Manila by 0.35% and Jakarta by 0.85%. Australian markets are also lower, with the ASX 200 falling 0.50% while the All Ordinaries is 0.45% lower. Perhaps more ironic than today being Afghanistan’s official Independence Day, New Zealand’s NZX has leapt 1.50% higher despite the country being set for an extended national lockdown. I attribute this to the near 2.50% fall by the New Zealand dollar this week.

The close lower on Wall Street, and negative performance in Asia, will see Europe also assessing tapering implications and opening lower this afternoon. However, I expect European equities to remain relatively unscathed for now, as a lower euro, now and into the future, will be positive for export performance. The rest of the week is likely to be dominated by the implications of a Fed taper being much closer to reality than even a month ago.

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