(Bloomberg) — Equities in China underperformed the region on Thursday as traders awaited signals of further stimulus from policymakers in Beijing ahead of a key economic meeting next month.
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Benchmarks in Hong Kong and mainland China fell, while stocks in Australia advanced. Shares in Japanese semiconductor-related companies jumped amid a report that the US is considering lighter-than-expected restrictions on sales of chip equipment and AI memory semiconductors to China. US equity futures climbed.
Usually held in December, China’s Central Economic Work Conference typically offered a blueprint on monetary, fiscal and various industrial policies for the coming year.
The talk of sanctions underscored the persistent threat to already fragile trade relations between the US and China, which was weighing on the region. Asian equities were on pace for their first back-to-back monthly drawdown this year following the dollar’s recent advance and concerns over escalating trade tensions.
Despite optimism on the potential for further stimulus from Beijing, “there are increased concerns and frustrations,” from investors, Winnie Wu, China equity strategist for Bank of America Securities, said on Bloomberg Television. The potential for further support and the prospect of US tariffs on China mean even long-term investors “are focusing on the next three to six months, or even three to six weeks,” she said.
Australian and New Zealand yields fell Thursday, tracking moves in Treasuries on Wednesday. Investors had sought the safety of US government debt, pushing 10-year yields lower. There’s no cash trading of US Treasuries in Asia on Thursday due to the Thanksgiving holiday.
A pick-up in the Federal Reserve’s preferred gauge of underlying inflation is reinforcing the case for policymakers to proceed gradually with further interest-rate cuts. Traders are also weighing the expected impact of Donald Trump’s administration picks, with the US president-elect’s policies expected to reinforce price pressures.
“The lack of an upside surprise in the recent US inflation read saw rate bets lean further toward another 25 basis point Fed cut in December,” said Jun Rong Yeap, a market strategist at IG Asia Pte. This potentially helps to “offer more clarity versus the coin-flip rate scenario priced just a week ago.”