(Bloomberg) — Asian shares declined after China’s debt swap program looked insufficient to some investors and data showed persistent deflationary pressures in the world’s No. 2 economy.
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A gauge of the region’s equities dropped as much as 1.3%, led by heavyweights including Tencent Holdings and Meituan. China’s CSI 300 benchmark fell as much as 1.4%, before erasing those losses to trade slightly higher. An index of Chinese companies listed in Hong Kong shed 1.6%.
The broad weakness reflects lingering concerns about the prospect of the world’s No. 2 economy, after Beijing unveiled a 10 trillion yuan ($1.4 trillion) program to defuse local governments’ debt risk but stopped short of unleashing new fiscal stimulus. In addition to anemic inflation, sentiment toward China is also faltering as foreign direct investment continues to slump.
Investors had hoped for more potent stimulus measures that would directly boost demand from a key Chinese legislature meeting last week, especially after Donald Trump’s presidential victory injected fresh uncertainty over tariffs. To many economists, Beijing’s stance signals an intention to preserve room to better respond to a potential trade war when Trump takes office next year.
“There will be a lot more volatility” for Chinese equities, Ecaterina Bigos, chief investment officer for Asia excluding Japan at AXA Investment Managers, told Bloomberg Television. While policy announcements on matters such as real estate have helped sentiment, “the fundamental picture has not changed yet. We haven’t seen that in earnings yet.”
UBS lowered its 2025 growth forecast for China following Trump’s election, expecting an “around 4%” expansion for 2025, and a “considerably lower” pace in 2026.
Oil fell for a second day as a soft outlook for top importer China continued to plague the market, while iron ore declined toward $100 a ton.
Elsewhere, Taiwan Semiconductor Manufacturing Co. slipped after a Reuters’ report saying the US told the firm to halt shipments of some advanced chips often used in AI applications to Chinese customers.
Bitcoin surged past $81,000 for the first time, driven by the incoming president’s support for digital assets and the election of pro-crypto lawmakers. A bevy of smaller cryptocurrencies have also rallied.
The dollar was broadly steady. The yen fell 0.6% against the greenback, ahead of the Japanese parliament’s vote later Monday that’s likely to keep Prime Minister Shigeru Ishiba in the job despite a national election setback.
