Asia share losses widen after weak China GDP data

Asian share losses widened on Tuesday after China reported weak fourth-quarter economic data, although investor expectations for a strong rebound in the country remained high even as concerns increase that the global economy is heading for a recession.

London is set to open flat with FTSE futures up 0.02% at 0512 GMT. E-mini futures for the S&P 500 index were down 0.31% however, indicating a lower opening after Monday’s public holiday.

MSCI’s gauge of Asia Pacific stocks outside Japan increased its losses to stand down 0.65% at 0535 GMT.

Hong Kong’s Hang Seng Index dropped 1.22% and China’s benchmark CSI300 Index slid 0.27% following the China data and as invesotrs sold gains ahead of the Lunar New Year holiday starting on Jan. 21.

China’s economy grew 2.9% in the fourth quarter of 2022 from a year earlier, National Bureau of Statistics data showed on Tuesday, beating expectations but still underlining the toll exacted by a stringent “zero-COVID” policy.

Growth for 2022 of 3.0% was far below the official target of about 5.5%. Excluding a 2.2% expansion after COVID-19 first hit in 2020, it was the worst showing in nearly half a century.

“I think investors will look through the Q4 GDP prints and focus on 2023,” said Redmond Wong, Greater China market strategist at Saxo Markets Hong Kong.

“According to Chinese media, more than half of the 31 provinces and municipalities that have released 2023 work reports are targeting above 5.5% growth for 2023.”

Vishnu Varathan, head of economics & strategy with Mizuho Bank’s Asia & Oceania treasury department, said though that China’s comprehensive policy commitment to inspire bona fide private sector confidence still has some way to go.

“Until then, ‘China cheer’ may be an opportunistic bull trade that is subject to bouts of reality checks along the way,” Varathan said. Japan’s Nikkei 225 rose 1.28%, following two sessions of heavy losses, as the yen’s relentless rise paused on the eve of a crucial Bank of Japan (BOJ) policy decision.

The BOJ is under pressure to change its interest rate policy as soon as Wednesday, after the central bank’s attempt to buy itself breathing room backfired, emboldening bond investors to test its resolve.

The dollar drifted off multi-month lows on Tuesday, while the yen was perched near seven-month highs against the currency.

Australia’s S&P/ASX 200 closed down 0.09%, after hitting a seven-month high on Monday.

European shares reached a near nine-month high on Monday, with the pan-European STOXX 600 closing up 0.5% at 454.6 - its highest level since April 2022 - as global equities continued to build on a New Year rally spurred by hopes of a rebound in China’s economy and an easing of price pressures in the United States and Europe.

“At the centre of the early 2023 financial market debate is how quickly inflation will fade, and whether or not major economies will be able to avoid hard landings,” ANZ analysts said in a research report on Tuesday.

“The drop in inflation in the U.S. is encouraging, although the fly in the ointment is that this drop is largely coming from energy and goods prices,” the report said.

“Services inflation continues to increase on an annual basis in the U.S. and will likely remain strong so long as the supply-demand mismatch in the labour market persists,” it said.

Two-thirds of private and public sector chief economists surveyed by the World Economic Forum in Davos expected a global recession this year, with some 18% considering it “extremely likely” - more than twice as many as in the previous survey conducted in September 2022.

U.S. crude fell 0.69% to $79.32 a barrel, paring some morning losses, while Brent rebounded to gain 0.25% at $84.67 a barrel, still near their highest levels this month as easing COVID-19 restrictions in China raised hopes of a demand recovery in the world’s top crude importer.

Spot gold was down 0.34% at $1911.36 per ounce.

 China and Hong Kong shares dropped Tuesday as Beijing released lower GDP growth and economic activity data for the fourth quarter, and investors sold on gains ahead of the Lunar New Year holiday.

 China’s blue-chip CSI 300 Index dipped 0.16%, while the Shanghai Composite Index declined 0.25%, retreating from a four-month high.

 Hang Seng Index dropped 1.01% and Hang Seng China Enterprises Index slid 0.76%.

 China’s economy grew 2.9% in October-December from a year earlier, data from the National Bureau of Statistics (NBS) showed on Tuesday, slower than the third-quarter’s 3.9% pace, as the fourth quarter was hit hard by stringent COVID curbs and a property market slump.