Asian markets were mixed Tuesday with confidence at a premium after the previous day’s sell-off, with Hong Kong suffering another hefty loss as investors kept a wary eye on China following its latest crackdown on a range of industries.
The announcement of new regulations on the tutorial sector – which has decimated private education firms – along with more moves against tech firms and fresh rules for property and food delivery companies has traders worrying where Beijing will strike next, analysts said.
That comes against a backdrop of rising concerns about the fast-spreading Delta Covid variant and the slow rollout of vaccines, with some governments having to impose new lockdowns or other containment measures.
Meanwhile, the highest-level China-US talks under the Biden administration ended without much headway in resolving their differences, suggesting tensions between the two superpowers will continue to simmer.
Hong Kong sank more than 5% to extended Monday’s drop of more than 4% after investors were spooked by Beijing’s latest move to tighten its grip on the economy.
At the weekend it said it would prevent firms that teach school curriculums from making a profit, raising capital or going public, making them virtually uninvestable.
Officials also looked to wind in tech giant Tencent, while unveiling new rules to protect hard-pressed drivers in the delivery business.
“China’s regulatory uncertainty is not going away,” said Rodrigo Catril at National Australia Bank. “Indeed it looks to be broadening, with no clarity as to when and where it will end.”
In Hong Kong, firms caught in the regulatory sweep fell further, though the losses for education firms were not as stark as on Monday.
Among tech firms taking a hit Tencent, which was told by officials to relinquish its exclusive music label rights over apparent antitrust breaches, dropped more than 7% and Alibaba shed 5%. Food delivery firm Meituan lost more than 12%.
There were also losses in Shanghai, Mumbai, Wellington, Bangkok, Jakarta and Taipei, but Tokyo, Singapore, Sydney, Seoul and Manila rose.
London, Paris and Frankfurt all fell at the open.
CMB International Securities strategist Daniel So added: “The key concern now is whether regulators will do more and expand the crackdown to other sectors.
“The regulatory concerns will be the key overhang to the market for the second half.”
Fed meeting in focus
The downbeat mood in Asia was in stark contrast to Wall Street, where all three main indexes finished at record highs yet again, thanks to more healthy corporate earnings and a long-running belief that the long-term outlook for the economy remains strong.
The US advances have come despite a worrying surge in cases of the Delta variant.
Eyes are now on the Federal Reserve’s key board meeting, which will be closely followed for some forward guidance on policy in light of the economic recovery and concerns about surging prices.
While the bank is expected to maintain its accommodative stance for the time being, it is thought officials will begin discussing tapering its bond-buying program.
“Equity markets have oscillated between inflation and growth fears, which should not coexist,” said Esty Dwek, at Natixis Investment Managers Solutions.
She added that “growth will hold up, the reopening will last and the Fed will err on the side of caution and maintain its accommodative stance,” while warning of volatility continuing in the months ahead.
The release of earnings from market titans including Apple, Microsoft and Amazon are also due this week, and observers said there was a likelihood that firms could continue to enjoy growth for another 18 months as the reopening presses ahead.
Bitcoin, which briefly topped US$40,000 on Monday, dropped 5% to about $36,770 after Amazon denied a report that it planned to begin accepting the digital currency as payment by the end of the year.
A job posting by the firm looking for someone to develop its “digital currency and blockchain strategy” fuelled excitement among crypto investors that the firm was on course to start taking the unit, sending shares rallying.
– AFP. Bloomberg News contributed to this story.