China's Ambitious Economic Targets Fall Short of Expectations

Arjun Pandit
05 Mar, 2024
Mumbai

Stock market sentiment in Asia was mixed as investors remained cautious after China set economic targets and failed to provide specific measures to tackle the protracted property market slump. 

Market indexes in Japan eased following the weakness in New York, and indexes in India declined on valuation worries. 

 

Nikkei 225 In Tokyo Edged Lower 

Market indexes in Japan edged lower following the weakness in tech stocks in overnight trading in New York. 

In domestic economic news, the Tokyo area's core inflation rate rose to 2.5% in February from 1.8% in the previous month, crossing above the target rate of 2% set by the Bank of Japan. 

Also, Japan's service purchasing managers' index was revised higher to 52.9 in February from 52.6 in January, a four-month low, S&P Global reported Tuesday. 

The Nikkei 225 Stock Average fell 0.06% to 40,083.37, and the Topix index rose 0.5% to 2,719.07. 

Stock market sentiment remained positive in the hopes of a stronger-than-expected rebound in corporate earnings in the March quarter because of the economic strength in the U.S. and the sharply lower yen in the year. 

SoftBank, Advantest, Tokyo Electron, and Disco declined between 1.2% and 1.7%. 

Leading conglomerates, also known as Sogo Shosha, Marubeni, Sumitomo, Mitsubishi, Mitsui, and Itochu, gained between 0.3% and 1.6%. 

 

China's Economic Measures Fall Short of Expectations

The Chinese government set 2024 economic growth, inflation, and unemployment targets that are likely to push the country's already high den to new record levels. 

The second-largest economy in the world is aiming to expand its economy by "around 5%," retail inflation at 3%, and create 12 million urban jobs to keep urban unemployment level at 5.5%. 

The Chinese government has little room to provide financial stimulus and fund wasteful infrastructure projects as the country's official debt-to-GDP ratio hovers at 286%, the largest among the top 20 economies in the world. 

The government is also planning to sell special Treasury bonds to raise one trillion yuan, or $139 billion. 

Chinese policymakers are struggling to balance economic growth above 5% with weak productivity growth and a shrinking and aging labor force. 

The government's plan failed to quell investor anxieties, and investors resumed selling in Hong Kong. 

The CSI index increased 0.4% to 3,556.97, and the Hang Seng index dropped 2.5% to 16,189.27. 

Moreover, foreign investors are still lowering their holdings in China, and foreign direct investment has plunged by 90% over the last two years after tensions between the nation and the U.S. rose. 

Tech stocks led the decliners, with Alibaba Group, JD.com, Tencent, and Baidu declining between 2% and 4%. 

Chinese property developers plunged after a lack of specific measures to revise the protracted slump in the property market. 

China Resources Land, China Vanke, Henderson Land, and Longfor Group dropped between 2% and 6%. 

 

India Stocks Trend Lower

Stocks in Mumbai traded sideways as investors looked abroad in the absence of domestic economic news. 

The Sensex and the Nifty indexes traded down in early trading amid weak global sentiment, and market indexes in the U.S., Japan, India, Germany, and France traded near record highs. 

Crude oil continued to advance as Houthi rebels stepped up attacks in the Red Sea, with no end in sight of the conflict between Israel and Palestine. 

Precious metals, such as gold and silver, edged higher after investors bid up prices in the hopes of a rate cut in the U.S. and the Euro Area and rising demand from China and India. 

Closer to home, market sentiment remained positive after India's economic growth accelerated in the December quarter, driven in part by sustained infrastructure spending by the government. 

Moreover, foreign investors are still lowering their holdings in China, and foreign direct investment has plunged by 90% over the last two years after tensions between the nation and the U.S. rose. 

The Sensex index decreased 0.2% to 73,730.21, and the Nifty index fell 0.1% to 22,373.35.

On the Mumbai stock exchange, 116 stocks traded at their 52-week highs and 25 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds increased to 7.06%, and the Indian rupee strengthened to ₹82.91 against the U.S. dollar.