Asian equities fluctuated at a three-year low as investors weighed weaker-than-estimated Chinese economic data against prospects for increased stimulus. The offshore yuan declined, while oil traded near the lowest since 2003.
The MSCI Asia Pacific Index swung between gains and losses after dropping 10 percent this year. The offshore yuan and Hong Kong’s dollar both fell 0.1 percent, while shares in Shanghai rallied at the end of the morning trading session on gains in railway companies. Oil traded around $29 a barrel in New York as Iran issued an order to boost production in an already oversupplied market.
China’s economy slowed in December, capping the weakest quarter of expansion since the 2009 global recession. Concern over the country’s ability to manage a transition to more sustainable growth has rattled investor confidence in 2016, compounding worries over waning global demand and falling oil prices. A Bank of America Merrill Lynch gauge of volatility expectations for equities, bonds, currencies and commodities has surged to its highest level since October.
“Some of the data missed estimates, but the market was sold off as if we’d see a hard landing in China,” said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors Ltd., which oversees about $114 billion. “It’s a battle, with data missing some surveys on one side with the market having predicted much worse on the other.”
China’s GDP rose 6.8 percent in the three months through December from a year earlier, the statistics bureau said in Beijing, below the median estimate of 6.9 percent in a Bloomberg survey. The economy expanded 6.9 percent in 2015, the weakest full-year pace since 1990, versus the government’s target for about 7 percent.
Industrial production increased 5.9 percent in December from a year earlier, compared with the 6 percent estimate and November’s 6.2 percent. Retail sales increased 11.1 percent, versus the 11.3 percent seen by economists. Fixed-asset investment excluding rural areas expanded 10 percent last year, missing the 10.2 percent median forecast.
“Beijing will be anxious to ensure growth momentum does not slow excessively,” said Bernard Aw, a strategist at IG Asia Pte in Singapore. “More stimulus might be in the works in the first half of 2016.”
The MSCI Asia Pacific index rose 0.1 percent at 12:07 p.m. in Hong Kong, after earlier falling as much as 0.5 percent. The Shanghai Composite jumped 1.6 percent. Japan’s Topix lost 0.2 percent, while Korea’s Kospi was little changed.
Futures on the Standard & Poor’s 500 Index were up 0.8 percent from their closing level on Friday, after trading in the contracts didn’t settle on Monday because of a holiday.
The yuan weakened to 6.5999 per dollar in offshore trading. The onshore currency in Shanghai, which is constrained by a daily central bank fixing, was little changed at 6.5796, according to China Foreign Exchange Trade System prices.
Hong Kong’s dollar weakened 0.1 percent against the greenback, while the yen dropped 0.2 percent.
“There will be bumps along the way as China continues to re-balance their economy,” Tony Chu, a Hong Kong-based money manager at RS Investment Management, which oversees about $18 billion, said by phone. “Until China manages to stabilize its currency, investors will remain sidelined.”
Oil futures in New York were down 0.2 percent from Friday’s settlement. Iran’s oil ministry gave directions to increase output by 500,000 barrels a day after international sanctions were lifted, according to the ministry’s news agency Shana. OPEC forecast a steeper drop in supplies from rival producers as prices slump, the group said in its monthly market report.
Gold erased declines in the spot market to trade little changed at $1,088.90 an ounce. Copper rose 0.5 percent in London after an earlier gain of as much as 0.7 percent.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.