Asian stock markets declined on Monday after China’s long-awaited economic support plan failed to meet investor expectations, while Bitcoin hit a new record, spurred by optimism over potential regulatory shifts following Donald Trump’s recent re-election.
Investors had hoped that China’s latest economic measures would include bold, growth-boosting actions to address its struggling economy. However, Beijing’s announcement on Friday only included an $840 billion increase in local government debt to address hidden debts but did not offer significant new stimulus initiatives. The limited response left investors concerned, especially after recent data showed Chinese inflation slowing and missing forecasts, indicating weaker consumer demand.
Following the announcement, Chinese stocks listed on the New York Stock Exchange fell over four percent. The decline continued into Monday, with Hong Kong’s market leading losses by shedding more than two percent. Major indexes across the region, including those in Shanghai, Tokyo, Sydney, and Seoul, also ended lower.
China has introduced a series of policies since September aimed at revitalizing its economy, which has struggled to recover after the lifting of strict COVID-19 restrictions at the end of 2022. These measures include interest rate cuts and adjustments in property market regulations. However, Friday’s cautious approach raised doubts among investors about Beijing’s commitment to aggressive stimulus.
Chris Weston, Head of Research at Pepperstone Group, suggested that China might be holding back stronger measures in anticipation of possible trade tensions with the U.S. under Trump’s renewed leadership. “China could be conserving its resources to respond strategically if Trump’s administration enacts tariffs targeting Chinese goods,” he noted.
Meanwhile, Bitcoin soared to a record high of $81,740 on Monday, driven by optimism that Trump’s policies may relax regulations on cryptocurrency markets. Cryptocurrency analyst Stephane Ifrah from Coinhouse expressed confidence in the sustained momentum, predicting Bitcoin could reach $100,000. “This upward trend is likely to continue, and regulatory easing would only further strengthen investor confidence,” he commented.
As U.S. markets closed on a high note, buoyed by recent Federal Reserve interest rate cuts, analysts are optimistic about a strong year-end economic performance. According to Bank J. Safra Sarasin, 2024 is on track to conclude with improved economic growth and lower inflationary pressures than initially projected. “The U.S. economy has demonstrated resilience, with a ‘soft landing’ still within reach,” the report stated.
However, the report also warned that Trump’s policies, while growth-positive in the short term, could create economic uncertainty if a trade conflict with China escalates. “Deregulation and tax cuts could stimulate nominal growth, but a trade war would have adverse effects, increasing prices and limiting growth prospects,” the report added.
As Asian markets respond to the mixed economic outlook, global investors are keeping a close watch on U.S.-China relations and the evolving cryptocurrency landscape. The next steps from both Washington and Beijing will likely shape market trends as 2024 draws to a close.
