Asian shares fall, Shanghai slumps as G20 disappoints

AFP: Asian stocks broadly fell on Monday, with Shanghai ending at a month-low and Tokyo diving into the red after a G20 meeting failed to quash concerns about stalling global growth. 

Chinese shares closed down 2.86%, after falling as much as 4.63% during the day, as traders remained unconvinced the G20 had promised enough to revive the world’s sagging economy. The weakening yuan also hit sentiment after China’s central bank set it at a four-week low – even after its chief said there was ‘no basis’ for the currency to keep falling.  The dollar held gains after upbeat US economic data stoked expectations the Federal Reserve may raise interest rates this year, while the strengthening yen dragged Tokyo stocks to a lower close. “Investors feel disappointed over the lack of good news from the G20, while the yuan has started to weaken again,” said Steve Wang, chief China economist at Reorient Financial Markets.

“A hazy economic outlook prompted some people to sell shares and buy homes, while many stocks remain overvalued,” he told Bloomberg News.  European and Asian equities rose on Friday, as hopes grew the world’s top 20 economies would agree to unleash their monetary firepower at a two-day meeting in Shanghai.

Pressure has been mounting for central bankers to do more to stimulate growth and reassure investors after financial markets posted one of the worst starts to the year in living memory. Equities, commodities and emerging market currencies have been hit hard as concerns about slowing growth in number two economy China and a slide in oil prices hurt sentiment around the world. But G20 ministers disagreed over the best way to stem the turmoil, and the final text from the meeting did not include the call for coordinated action many had been hoping for.

The final communique on Saturday said the group ‘will use all policy tools -- monetary, fiscal and structural – individually and collectively’ to build confidence and strengthen the recovery.

Dollar strength returns

Traders said the focus in China will now shift to the National People’s Congress, the meeting of its rubber-stamp parliament, beginning on 5 March. 

“Before the G20 meetings, people expected stabilisation policies and the central bank to make statements, but not too much happened,” Ronald Wan, CEO of Partners Capital, told Bloomberg News.

“People tend to cash out before the parliamentary meeting.”

The dollar remained strong and oil prices rose after upbeat US economic data was released last week.

The economy expanded by one% in the final quarter of the year, the Commerce Department said Friday, surprising analysts by revising up its previous estimate of 0.7%.

US durable goods orders jumped 4.9% in January, after two months of declines, data showed Thursday. 

Analysts said the strong data could provide more support for the US central bank to hike interest rates again this year, despite the global slowdown.

“The biggest story of the moment has been the far better performance of US data than the market had expected, which is seeing US dollar strength return,” said Angus Nicholson, a market analyst at IG in Melbourne. 

Oil prices were mixed in Asian afternoon trade. At around 0730 GMT, US benchmark WTI was down 12 cents at $ 32.66 while Brent crude was up 10 cents at $ 35.20.