Asia shares appeasement of concerns over Chinese crackdown and COVID-19 peak

HONG KONG, Aug. 17 (Reuters) – Asian stocks stumbled on Tuesday, rocked by concerns over Chinese regulations for its once-free internet sector and the global surge in COVID-19 infections caused by the Delta variant.

Markets were also following developments in Afghanistan, as the deteriorating situation in the capital Kabul overshadowed the strength overnight on Wall Street.

Chinese regulators on Tuesday released draft rules for the internet industry, banning unfair competition and restricting the use of user data, the latest step in cracking down on powerful tech companies in the country. Read more

“The news sent shock waves through the industry and drastically depressed the stock prices of several Internet majors,” said Zhang Zihua, chief investment officer at Beijing Yunyi Asset Management. “As the new rules have several measures adapted to weaken the leadership position of dominant players.”

The Hong Kong Technology Index (.HSTECH), where several of China’s biggest internet giants are listed, fell 1.74%, compared to a loss of 1% for the benchmark Hang Seng (. HSI) of the city.

Online literature platform operator China Literature (0772.HK) led the drop in internet stocks, down 9.2%. Internet giants Tencent (0700.HK), Alibaba (9988.HK) and Meituan (3690.HK) slipped 3.88%, 3.5% and 1.72% respectively.

“The evolution of government policy initiatives weighs on sentiment and causes some uncertainty. That said, regulation is a constant in China,” said Catherine Yeung, chief investment officer at Fidelity International.

“Investors need to accept and integrate this into their risk-return frameworks and take it into account when assessing companies’ long-term business prospects.”

The largest MSCI index of Asia-Pacific stocks excluding Japan (.MIAPJ0000PUS) fell 1.1%. China’s benchmark Shanghai Composite Index (.SSEC) fell 1.05% while the blue-chip CSI300 (.CSI300) fell 1.11%.

Elsewhere in Asia, Australian stocks (.AXJO) fell 0.98%, while Japan’s Nikkei stock index (.N225) edged down 0.11%.

In early European trading, pan-regional Euro Stoxx 50 futures were down 0.04% and FTSE London futures fell 0.17%. Those of the German DAX fell 0.01%. US equity futures, the S&P 500 e-minis, were down 0.27%.

Amid signs that the global economic recovery is faltering, the continued spread of new variants of COVID-19 and the impact on the global economy have also shaken market confidence.

A series of Chinese data on Monday showed a surprisingly sharp slowdown in the world’s second-largest economy, while the New York Federal Reserve’s Empire State barometer on manufacturing activity fell more than expected. Read more

“As we enter the second half of 2021, we believe that investor concern is shifting from inflation to global growth,” said Wang Qi, CEO of MegaTrust Investment. “Inflation remains our main concern, but we are also worried about a possible economic slowdown.”

Investors were also monitoring the unrest in Afghanistan, where thousands of civilians desperate to flee the country flocked to Kabul airport after the Taliban captured the capital and declared war on foreign and local forces. Read more

Wall Street rebounded on Monday, pushing two of its top three indexes higher, the benchmark S&P 500 and Dow industrials to record highs, as investors moved to defensive sectors and stocks recovered from losses initials.

The Dow Jones Industrial Average (.DJI) and S&P 500 (.SPX) rose 0.31% and 0.26% respectively. The high-tech Nasdaq Composite (.IXIC) slipped 0.2%.

Investors are focused on when the Federal Reserve will put the brakes on its easy money policy, with the minutes of the last central bank meeting scheduled for Wednesday.

Boston Federal Reserve Chairman Eric Rosengren said on Monday that one more month of solid job gains could meet the U.S. central bank’s demands to start cutting back on its monthly asset purchases. Read more

The dollar appreciated against a basket of six major currencies, rising 0.083% to 92.699 after falling to a one-week low on Friday.

In riskier moves, the yield on benchmark 10-year Treasuries fell as demand for US safe-haven bonds increased. The benchmark 10-year Treasury yield fell to 1.25% from its US close of 1.257% on Monday.

US crude fell 0.03% to $ 67.27 a barrel. Brent crude fell to $ 69.47 a barrel.

Gold was slightly higher. Spot gold was trading at $ 1,787.61 an ounce.

Editing by Richard Pullin and Jacqueline Wong

Our Standards: The Thomson Reuters Trust Principles.