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Most regional stocks were nursing steep losses from the prior week after the Federal Reserve warned U.S. could rise further, and are likely to remain higher for longer. The outlook dented most risk-driven assets, and is set to dampen regional markets in the coming months.
Sentiment was also on edge before a string of key regional economic readings this week.
Renewed concerns over China also weighed, especially after embattled real estate developer China Evergrande Group (HK:3333) said it will be unable to issue new debt due to an ongoing government investigation into its unit Hengda Real Estate Group. News of the investigation had fueled fears of a broader government crackdown on the property sector, which is grappling with a brewing debt crisis.
The property developer’s shares tumbled nearly 25% in Hong Kong trade, also sparking losses in other real estate stocks.
Country Garden Services (HK:6098) and Longfor Properties Co Ltd (HK:0960) slid about 3% each, dragging Hong Kong’s Hang Seng index down more than 1%. China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes lost between 0.3% and 0.5%.
Chinese stocks have seen increased volatility this year, as markets weighed worsening economic conditions against bets that the government will roll out more stimulus measures to support growth.
But sentiment has worsened in recent months, especially given Beijing’s conservative approach to more stimulus. Concerns over a meltdown in the property sector have also kept sentiment towards the country on edge.
Focus this week is now on purchasing managers’ index data for September, which is expected to shed more light on business activity. While the manufacturing sector saw some improvement in August, service sector activity appeared to be deteriorating.
Concerns over China spilled over into broader Asian markets. Australia’s ASX 200 fell 0.4%, with a reading on Australian consumer price index (CPI) inflation due this week.
South Korea’s KOSPI sank 0.6%, while futures for India’s Nifty 50 index pointed to a positive open after the index plummeted from record highs last week.
Japan’s Nikkei 225 and TOPIX were the key outliers for the day, rising 0.4% and 0.7%, respectively.
Local stocks reversed most losses from Friday after the Bank of Japan said it had no plans to scale back its monetary stimulus policies in the near-term, heralding continued support for the Japanese economy and stocks.
A dovish BOJ has been one of the key drivers of a Japanese stock rally this year, with the Nikkei and the TOPIX trading just shy of a 33-year peak.
Focus this week is on Tokyo inflation data for September, due on Friday. The reading acts as a precursor for countrywide inflation.
