Asia report: Markets lower on China regulatory fears, NZ locks down
Equity markets were down across the board in Asia on Tuesday, with Chinese technology plays in focus after regulators in Beijing released a draft of new competition rules for the internet sector.
In Japan, the Nikkei 225 was down 0.36% at 27,424.47, as the yen weakened 0.06% against the dollar to last trade at JPY 109.31.
Of the major components on the benchmark index, robotics specialist Fanuc was down 0.27%, Uniqlo owner Fast Retailing slipped 0.1%, and technology giant SoftBank Group was off 1.34%.
The broader Topix index was 0.49% weaker by the end of trading in Tokyo, settling at 1,915.63.
On the mainland, the Shanghai Composite slid 2% to 3,446.98, and the smaller, technology-heavy Shenzhen Composite was 2.52% lower at 2,392.49.
South Korea’s Kospi was off 0.89% at 3,143.09, while the Hang Seng Index in Hong Kong lost 1.66% to 25,745.87.
Internet-focussed technology shares were in the red in the special administrative region, with Alibaba down 4.77%, JD.com sliding 5.16%, and Tencent 4.14% weaker.
That came after China’s State Administration for Market Regulation released draft rules on competition in the sector earlier on Tuesday.
The proposed regulations include tacking fake product reviews, and banning certain uses of consumer data.
“On the geopolitical front, the relationship between the two biggest economies in the world, the United States and China, is also getting heated rapidly,” added Naeem Aslam, chief market analyst at AvaTrade.
“Investors should note that Gary Gensler, chair of the US Securities and Exchange Commission, has warned stock traders of the potential risks of investing in Chinese-based companies.
“He has said that there is a lot that Americans don't know about Chinese companies that are listed on US stock exchanges.”
Aslam noted that earlier in the year, the United States regulator put a hold on Chinese companies from conducting initial public offerings stateside until they provided more comprehensive disclosures.
“The regulators also warned that investors may be buying stakes in shell companies rather than getting direct exposure to businesses based in China.
“Investors should understand that the stance taken by American officials as well as the rise of regulatory crackdowns in China has raised uncertainty, leading to higher investment risk.”
Seoul’s blue-chip technology plays were mixed, with Samsung Electronics down 0.27%, and SK Hynix closing flat.
Oil prices were lower as the region went to bed, with Brent crude last down 0.36% at $69.26 per barrel, and West Texas Intermediate slipping 0.43% to $67.
In Australia, the S&P/ASX 200 was down 0.94% at 7,511.00, as investors in the sunburnt country digested the latest minutes from the Reserve Bank of Australia.
The central bank acknowledged the “high degree of uncertainty” around the outlook for the second half in the August meeting, given the spread of the ‘Delta’ variant of Covid-19 and lockdowns for most of the country’s population.
Across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped 0.67% to 12,635.32, with the Wellington bourse closing not long before Prime Minister Jacinda Ardern announced the country would be immediately entering a ‘level 4’ lockdown.
Under the restrictions, only grocers, chemists and fuel retailers will be allowed to remain open, and only a narrow list of essential professions will be exempt from the stay-home order.
The move came after the discovery of a locally-transmitted case of Covid-19, unlinked to the country’s closed border, in the largest city of Auckland, after many months of having zero Covid-19 cases in the community.
It put a dampener on expectations that the Reserve Bank of New Zealand could be the first central bank of a developed economy in the region to raise interest rates in its next decision on Wednesday.
“A sense of caution washed over Asian markets on Tuesday as unease over the spread of the Delta variant and concerns around the strength of China’s recovery drained risk sentiment,” said FXTM senior research analyst Lukman Otunga, adding that the dollar edged higher and gold prices firmed, as Treasury yields drifted lower.
“A just-announced new lockdown in New Zealand has slammed the Kiwi [dollar] after a single case of Covid-19 was found in Auckland.
“This comes ahead of the RBNZ, who were expected to raise interest rates at its meeting tomorrow.”
The down under dollars were indeed weaker against the greenback, with the Aussie last off 0.63% to AUD 1.3717, and the Kiwi sliding 1.47% to NZD 1.4454 on the back of New Zealand’s fresh lockdown.