Hong Kong and China stocks rebound amid easing regulatory fears
Hong Kong and China stocks led the gains in Asia markets on Monday, as investors shrugged off the latest regulatory crackdowns by Beijing and focused on the positive earnings outlook. The Hang Seng index in Hong Kong jumped 2.33% to close at 18,130.74, while the Hang Seng Tech index surged 3.05% to 6,379.72. The Shanghai Composite index in mainland China rose 1.12% to 3,098.64, and the Shenzhen Component index added 1.73% to 13,379.41.
The rally came after China’s market regulator issued draft rules on Friday to curb unfair competition and protect consumers’ rights in the internet sector, targeting practices such as fake online reviews, misleading content and data misuse. The move was seen as part of Beijing’s ongoing efforts to rein in the power and influence of its tech giants, which have faced increased scrutiny and penalties in recent months.
However, some analysts said that the regulatory risks have been largely priced in by the market, and that the fundamentals of the Chinese tech sector remain strong. “We believe that China’s internet sector is still attractive in terms of growth potential, innovation capability and valuation,” said Frank Benzimra, head of Asia equity strategy at Societe Generale. He added that the sector could benefit from the recovery of domestic consumption, the acceleration of digitalization and the expansion of overseas markets.
Japan’s unemployment rate rises unexpectedly in July
Japan’s unemployment rate rose unexpectedly in July, as the country grappled with a surge in Covid-19 cases and a state of emergency that weighed on economic activity. The jobless rate increased to 2.9% in July from 2.8% in June, according to data released by the Ministry of Internal Affairs and Communications on Monday. The result was higher than the median forecast of 2.8% by economists polled by Reuters.
The data also showed that the number of employed persons decreased by 110,000 from a year earlier to 66.64 million in July, while the number of unemployed persons increased by 90,000 to 1.99 million. The labor force participation rate edged down to 61.8% from 61.9% in June.
The rise in unemployment reflected the impact of the Covid-19 pandemic on Japan’s labor market, especially in the service sector, which has been hit hard by the restrictions on mobility and social distancing measures. The government declared a state of emergency in Tokyo and some other areas in July, which was later extended until September 12, amid a spike in infections driven by the Delta variant.
Asia-Pacific markets mostly follow Wall Street higher
Other major Asia-Pacific markets mostly followed Wall Street higher on Monday, as investors digested the comments from U.S. Federal Reserve Chair Jerome Powell at the Jackson Hole symposium last week. Powell said that the Fed could start tapering its bond-buying program this year, but stressed that it would not mean an imminent rate hike. He also acknowledged that inflation remains “elevated” but reiterated his view that it is likely transitory.
The Nikkei 225 in Japan gained 0.54% to close at 32,169.99, while the Topix index rose 0.49% to 2,215.71. The Kospi index in South Korea advanced 0.65% to 3,143.09, while the S&P/ASX 200 in Australia edged up 0.17% to 7,503.20.
The MSCI Asia ex-Japan index climbed 1.73% to 775.59.
Powell’s speech was seen as dovish by some market participants, as he did not provide a clear timeline for tapering and emphasized that it would depend on the economic data. He also said that the Fed would remain flexible and patient as it monitors the evolution of the pandemic and its effects on growth and inflation.
“The Fed Chair’s speech was well balanced and did not rock any boats,” said Shane Oliver, chief economist at AMP Capital. He added that Powell’s remarks suggest that “the Fed is still on track to announce a tapering plan later this year – most likely at its November meeting – but that interest rate hikes are still a fair way off.”