Asian markets struggled on Thursday to recover from the previous day’s sell-off, with Hong Kong dragged down by further losses in casinos as well as tech firms following government crackdowns on the sectors.
A strong performance on Wall Street was not enough to spur buying in the region, where concerns about the spreading Delta variant and its impact on the economic rebound are draining confidence.
Traders are also keeping tabs on developments in China where one of its biggest developers, Evergrande, is drowning in a sea of debt that could see it crash into a bankruptcy observers fear could have a severe impact on the world’s number two economy and beyond.
Hong Kong led losses, extending its streak to a fourth straight day, with Macau casinos back in the spotlight after Wednesday’s crash fuelled by plans unveiled by city authorities to tighten its control of the industry. Trillions of dollars were wiped off the valuations of the six listed firms in reaction to the proposals, which include putting a government representative on their boards.
The announcement fanned concerns that the days of multi-billion-dollar revenues are gone in the city, which before the pandemic raked in more in a week than Las Vegas did in a month. US-owned Wynn Macau and Sands China were among the worst-hit, and their losses extended into Thursday with both shedding five per cent. The firms’ US stocks were also taking a hammering on Wall Street. Melco tanked by a similar amount, while MGM and SJM fared a little less badly. Galaxy Entertainment rose, however.
Macau’s proposed clampdown comes as officials in mainland China tighten their grip on a range of private enterprises in a drive to reform the business and cultural landscape and achieve Xi Jinping’s goal of “cultural prosperity”.
Oil extends gains
Tech firms, which are high on officials’ list of targets, also extended a long-running sell-off in Hong Kong, with market heavyweights Alibaba and Tencent more than one per cent off.
“The regulatory crackdown... threatens to slow the domestic growth momentum with many China commentators seeing a pivot away from maximising growth, to social order and stability,” said National Australia Bank’s Tapas Strickland.
Elsewhere in Asia, Shanghai, Tokyo, Seoul, Wellington and Taipei also fell, though Sydney, Singapore, Manila and Jakarta edged higher.
While markets are struggling to build on their more than year-long rally from the wreckage of last year, analysts remain largely optimistic that the global economy will continue to recover as it slowly emerges from the pandemic.
While markets are struggling to build on their more than year-long rally from the wreckage of last year, analysts remain largely optimistic that the global economy will continue to recover as it slowly emerges from the pandemic
“Global economic growth remains above trend, albeit past peak levels, supported by central bank liquidity, progress on vaccine distribution, and continued reopening momentum despite the spread of the Delta variant,” investment management firm T. Rowe Price said in a report. But it did warn that the “deceleration” phase of the market cycle had begun, as seen in an easing of economic and earnings growth.
Oil prices added to Wednesday’s big gains that came on the back of data showing US stockpiles reduced last week after huge storms hammered production in the Gulf of Mexico.