Asian stock markets fell Thursday after China said it will curb overcapacity and excessive investment in sectors like steel and concrete, adding to concerns that a global economic recovery is sustainable.
Meager gains overnight on Wall Street also contributed to the mood among investors increasingly cautious following the sharp rally in global markets since March. While the economic indicators are turning positive, investors wonder whether further gains in stock prices are justified.
Wednesday’s announcement that Beijing plans to reduce capacity in steel and other sectors comes after economists warned that China’s 4 trillion yuan (586 billion U.S. dollars) stimulus package was the creation of excess supply in a wide range of industries. In the long term, this may be positive for the Chinese economy, but in the short term may mean less profit.
"They pumped billions (yuan), the economy and the leader of the local economies used the money to build steel mills that have no market," said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong. "This is bad for the stock market."
"Probably see a temporary respite," he said. "In Hong Kong, people are ready to sell because the market has grown so much this summer."
Hong Kong’s Hang Seng index was down 258.33 points, or 1.3 percent, to 20,197.99 while Tokyo’s Nikkei 225 average slid 188.55 points, or 1.8 percent, to 10,451.16.
Shanghai Composite Index, which has fluctuated wildly in the last two weeks, dropped by a relatively moderate 0.4 percent to 2,954.91. South Korea KOSPI declined 1 percent and a reference point in Australia was flat.
Markets in Singapore and India were also moderately.
Wednesday on Wall Street, stocks ended with small gains after positive reports on sales of sales of houses and big ticket items, suggesting the world’s largest economy is in recovery.
But investors in the United States does not seem to hit one of two reports. Many have already factored in a recovery of the housing market, and the gain of 4.9 percent in durable goods seems to have been guided by the government recently expired "Cash for Clunkers" program that has driven thousands of people to trade in vehicles older than the new ones.
Dow Jones Industrials rose 4.23, or 0.04 percent, to 9,543.52, while the broader Standard & Poor’s 500 index rose 0.12, or 0.01 percent, to 1,028.12. The tech-heavy Nasdaq ended barely changed 2,024.43.
Asian investors focus on the American economy, because it is a major export market.
"The U.S. economy is showing signs of improvement," said Mon "The only thing that has not improved is the occupation. This is the missing piece in the recovery."
Wall Street futures were down, suggesting a tepid opening Thursday in New York. Dow futures down 23 points, or 0.2 percent, to 9503, while the S & P futures slipped 3.2, or 0.3 percent, to 1,023.60.
Crude oil prices fell, with crude oil benchmark for October delivery down 26 cents to $ 71.17 a barrel.
In currencies, the dollar weakened further to ¥ 93.73 from ¥ 94.21 late Wednesday in New York. The euro was little changed at $ 1.4246.
Related posts:
