Local stocks plunged Monday on profit taking after last week’s strong recovery.
The benchmark Philippine Stock Exchange index lost 74.03 points, or 1.12 percent, to close at 6,550.75.
Philstocks Financial Inc. analyst Claire Alviar said the lower-than-expected China’s gross domestic product growth in the second quarter also dampened investors’ sentiments.
“This adversely affected sentiment in Asia as many countries in the region are either China’s trading partners or have some form of connection with the country,” Alviar said.
Foreign investors remained net buyers despite the market decline. Value turnover was thin at P2.82 billion.
Other Asian markets also struggled Monday to build on last week’s rally, with new data showing China’s economy grew less than expected in the second quarter as its post-Covid recovery runs out of steam.
Equities surged last week as news that US inflation slowed more than forecast fanned hopes that the Federal Reserve would soon end its campaign of interest rate hikes.
The advance was also bolstered by pledges from Beijing to introduce stimulus measures for the struggling economy.
However, the scale of the work facing Chinese officials was laid bare Monday, with data showing gross domestic product expanded 6.3 percent on-year in April-June, much less than forecast in an AFP survey.
Growth was also sharply down on a quarter-on-quarter basis, which is seen as a better guide to the state of the economy owing to the low base of comparison with last year’s Covid-depressed performance.
The National Bureau of Statistics also said youth unemployment hit a record 21.3 percent in June and retail sales also missed estimates, adding to months of data highlighting softness in the world’s number-two economy.
“China’s recovery is going from bad to worse,” said Harry Murphy Cruise at Moody’s Analytics.
“After a sugar injection in the opening months of 2023 (following the lifting of zero-Covid measures), the pandemic hangover is plaguing China’s recovery.”
The readings will further stoke calls for authorities to announce more measures to fire growth, having cut interest rates last month.
But while officials have pledged to do more, there has been little concrete out of Beijing so far.
“Asia investors have been greeted by a dismal Chinese data dump to start the week,” said SPI Asset Management’s Stephen Innes.
“But… the data will be viewed through the lens of how it will influence the policy decisions made at the upcoming Politburo meeting in late July. With that in mind expectations should grow that Beijing will do major fiscal soon.”
Shanghai fell nearly one percent, and there were also losses in Sydney, Seoul, Singapore, Manila and Wellington. Taipei, Mumbai and Jakarta edged up.
Hong Kong was closed because of a typhoon, while Tokyo was shut for a holiday.
London, Paris and Frankfurt dropped at the open.
The tepid performance Monday came as investors weighed the outlook for US interest rates after last week’s consumer and wholesale price indexes came in below forecasts.
The readings were seen as giving the Federal Reserve room to wind down its monetary tightening drive, which has lasted more than a year.
While it is expected to hike again this month, there is debate over whether it will then call it a day or announce one more before the end of the year.
“We think it is premature to declare victory on inflation and expect volatility to remain elevated over the near term,” JPMorgan Chase & Co. strategists led by Phoebe White said.
Still, bets that the Fed is close to the end of its cycle have weighed on the dollar in recent weeks, with other central banks still lifting costs owing to stubbornly sticky inflation prints.
The euro last week touched $1.1248, the highest level since February 2022, while the yen and sterling have also pushed to multi-month highs. With AFP