Asian markets experienced declines on Monday as China’s anticipated economic support measures failed to meet investors’ expectations.
Meanwhile, traders closely monitored developments in Washington, where Donald Trump is in the process of forming his cabinet following last week’s election victory.
Last week, markets surged with the prospect that a second Trump administration, backed by a Republican Congress, might implement business-friendly policies like deregulation and tax cuts, which investors hoped could offset worries over potential trade conflicts.
However, sentiment shifted when Beijing announced on Friday a $840 billion increase in local government debt to tackle “hidden debt” issues but refrained from introducing significant growth-stimulating measures for its sluggish economy.
“Investors had been anticipating a ‘bazooka’ stimulus,” analysts noted, especially after Sunday’s data revealed slower-than-expected inflation in China, underscoring the need for stronger economic boosts.
In recent months, Chinese authorities have rolled out various policies, including rate cuts and relaxed home-buying restrictions, to jumpstart an economy struggling since the relaxation of strict Covid restrictions at the end of 2022. However, Friday’s limited announcement led to a drop of over four percent in Chinese shares traded on Wall Street.
The impact was felt across Asian markets, with Hong Kong leading losses with a more than two percent drop. Shanghai, Tokyo, Sydney, Seoul, Wellington, Taipei, Manila, and Jakarta also saw declines as traders reacted to the news.
