HONG KONG, (Reuters) – Asian stocks fell yesterday as investors feared fresh rate cuts in China would not be enough stabilise its cooling economy or halt a collapse in its stock markets.
China’s key share indexes attempted to move higher several times in early trade only to be slapped back by waves of selling, reflecting investors’ views that much more support was needed from the government and the central bank.
Following a near 20 percent plunge in stock prices in three days, the People’s Bank of China cut interest rates and lowered the amount of reserves banks late on Tuesday in a much-anticipated move that some economists said was long overdue.
While the double-barrelled policy moves were initially cheered by arkets around the world, the impact didn’t last long as investors quickly resumed their focus on the deteriorating outlook for China and the global economy.
By midmorning, China’s CSI300 index <.CSI300 was down 0.5 percent at 3,028.48 points, while the Shanghai Composite Index was down 1.3 percent at 2,925.97.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2 percent in early trade and was just shy of a three-year low hit in the previous session.
Japan’s Nikkei was the lone bright spot, rising 1.3 percent, while Australia fell 0.4 percent.
Companies such as mining giant BHP Billiton have softened expectations of demand growth from China while countries most exposed to China’s economy, such as Indonesia, have dialled down their growth forecasts for 2015 in recent days.
In a sign of how fearful investors have become of risky assets, U.S. stock index futures resumed their descent in early Asian trade with the U.S. S&P 500 mini futures down 0.4 percent, nearing closer to Monday’s 10-month low of 1,831.
Overnight, major U.S. stock indexes shot up after China’s policy easing but later gave up all their gains, with the S&P 500 ending down 1.4 percent.
U.S. stock futures were down 0.2 percent in Asian trade, suggesting further weakness on Wall Street later in the day.
Fixed income markets were active with investors rushing for cover to government debt and cash. The 10-year note traded to a low yield of 1.90 percent earlier this week before recovering to trade at 2.06 percent currently as prices rose. It was close to 2.50 percent barely a month ago.
“Some parts of the Asian bond markets have become quite illiquid and investors are only buying high-quality paper amid this selloff,” said Hayden Briscoe, fixed-income director at AllianceBernstein in Hong Kong and part of a team that manages $250 in assets globally.
