Asian Stocks Drop, China to Reopen After Holidays: Markets Wrap

(Bloomberg) -- Asian stocks declined following losses in the US, with investors focused on the reopening of Chinese markets following a weeklong holiday.

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Shares dropped in Tokyo, while Wall Street was dragged down by a tech selloff, geopolitical angst and bets on a smaller Federal Reserve rate cut. A gauge of US-listed Chinese equities was flat overnight. Stocks in Australia edged higher.

All attention is on China, with a briefing by the nation’s top economic planner set for 10 a.m. local time being closely watched for more policy measures. The government unleashed a slew of stimulus measures before the Golden Week holiday break and Chinese shares have soared as the support reinvigorated investor confidence. Beijing’s use of fiscal firepower has the potential to unlock between 4 trillion yuan ($570 billion) and 10 trillion yuan in stimulus, according to economist Jia Kang.

“There is definitely a lot of support for the market coming through,” Kerry Craig, JPMorgan Asset Management global market strategist, said on Bloomberg TV. “There is just a case of whether the market may be a little bit disappointed if they don’t get what they expect on that fiscal package.”

An overheating of the A-share market and the Chinese government’s delivery on its recently announced policy stimulus are among the risks investors should watch amid the Chinese stock market rally, according to Morgan Stanley.

Several other investors are also not convinced about how long the rally will sustain. Invesco Ltd., JPMorgan Asset Management, HSBC Global Private Banking and Wealth, and Nomura Holdings Inc. are among those viewing the recent rebound with skepticism and waiting for Beijing to back up its stimulus pledges with real money.

“So while we do anticipate a pop, we do expect more policy news to come out that would support share prices,” said Lorraine Tan, director of Asia Equity Research at Morningstar on Bloomberg TV. “We’d probably be a lot more selective going forward for anybody who wants to play into the uptick,” she said.

The CSI 300 Index in China jumped 8.5% on Sept. 30, the last day of trading before the Golden Week holidays. Meanwhile, Chinese shares in Hong Kong continued the rally. Given the magnitude of gains in related shares over the holiday, the 10% trading limits on some stocks may factor in, potentially delaying the full sense of market reaction.