Weak Growth Drags Down China Stocks, and Prospects of a Wider Middle East War Overhangs Asian Markets

Arjun Pandit
17 Jan, 2024
Mumbai

Stocks in Asia dropped sharply after China reported weaker-than-expected GDP growth and Iran launched drone strikes in Pakistan, Syria, and Iraq as the Israel-Hamas war spiraled into a wider war in the Middle East.

Market indexes in China declined sharply after a government report showed the economy expanded at a slower-than-expected pace and home prices fell.

The weaker-than-expected growth rate raised the prospect of downward earnings revisions.

The Hang Seng Index in Hong Kong plunged 3.2% to 15,362.56, and the CSI 300 index dropped 1% to 3,268.69.

GDP in the fourth quarter expanded 5.2% from the previous year and rose at the same rate in the full-year 2023, the National Bureau of Statistics reported Wednesday.

The economy accelerated in the fourth quarter after expanding by 4.9% in the third quarter.

In full-year 2023, the economy expanded at a faster pace than the 3% increase in 2022, but expectations of faster growth at the start of the year ran high.

Protracted property market slumps and weak growth in consumer spending held back the economy from recovering from the pandemic era.

Economists and investors were anticipating China's economy to expand at a faster pace of 5.3% to 5.5% in the fourth quarter.

Retail sales in December rose 7.4% from a year ago, and industrial output accelerated to 6.8% in the month from 6.6% in the prior month, the statistics bureau noted in separate reports released Wednesday.

New home prices in major cities in mainland China declined by 0.45% from the previous month, the sharpest decline since February 2015.

Alibaba Group, Tencent, and JD.com declined between 3% and 4%, and property developers extended losses of 4% after new home prices fell.

Longfor Group, China Resources Land, and China Overseas Land declined between 4% and 6%.

Iran conducted a "combination of missiles and drone strikes" targeting bases belonging to the Jaysh al-Dhulm, also known as the Jeysh al-Adl terrorist group, on Tuesday.

Iran said in mid-December that Jaish al-Adl stormed a police station in Sistan and Balouchestan province’s city of Rask, southeast of Iran, killing 11 Iranian police forces, according to Iran's state-aligned Tasnim news agency report today.

On Monday, Iran launched missile attacks in northern Iraq and Syria, and Iran-backed Houthi rebels stepped up their attacks in the Red Sea.

The prospect of a wider war disrupting crude oil supplies and merchant ship passage in the Red Sea kept investors in India and Asia on edge.

In Mumbai trading, the Nifty and Sensex indexes dropped as much as 1% in early trading after Iran conducted strikes in the southwest Baluchistan province of Pakistan.

The Nikkei index in Tokyo edged up 0.2% to 35,671.79, the ASX index in Sydney fell 0.3% to 7,393.10, and the KOSPI index dropped 2.3% to 2,440.10.