Asian stocks are reeling as opinions differ on China's stimulus promises

By Rae Wee

SINGAPORE (Reuters) – Asian stocks fluctuated between gains and losses on Monday as investors struggled to come to a unified view on China's stimulus promises made over the weekend, which were broad but short on details.

Finance Minister Lan Foan promised to “significantly increase” debt at a widely watched news conference on Saturday, but left investors guessing about the overall size of the stimulus package, a detail needed to gauge the longevity of a stock market rally.

“Most onshore investors believe Beijing's decision to restructure local government and housing debt with central government funds is more significant than many foreign investors realize,” Morgan Stanley analysts said in a note to clients.

The divergence was evident on Monday after shares in Hong Kong opened slightly lower and were choppy in early trading, in sharp contrast to their mainland Chinese peers which got off to a strong start.

The Hang Seng index was last down marginally 0.01%, while the blue-chip CSI300 index rose 1.6%.

However, real estate stocks at home and abroad posted solid gains as investors bet that recent stimulus measures could help China's struggling real estate sector.

The Hang Seng Mainland Properties Index rose 2.2%, while the CSI300 Real Estate Index rose 3.7%.

The mixed picture sent MSCI's broadest index of Asia-Pacific shares outside Japan down 0.11%, after falling 1.7% last week as the recovery in Chinese stocks stalled.

Trading in Asia was thinned out on Monday due to the holiday in Japan.

U.S. stock futures also fell slightly, with S&P 500 futures losing 0.1% while Nasdaq futures lost 0.25%.

EUROSTOXX 50 futures and FTSE futures fell 0.08% and 0.05% respectively.

Data on Sunday showed that consumer inflation unexpectedly eased in September, while producer price deflation intensified, also hurting China's growth prospects.

On ongoing concerns about China's economy, the onshore yuan fell 0.11% to 7.0743 per US dollar, while its offshore counterpart fell a stronger 0.2% to 7.0828 per US dollar.

Oil prices also fell by more than $1 a barrel on Monday on concerns about slowing Chinese demand for the commodity. (OR)

Brent crude futures were last down 1.32% at $78.00 a barrel, while U.S. West Texas Intermediate crude futures fell 1.3% to $74.58 a barrel.

Still, the latest string of stimulus packages prompted analysts at Goldman Sachs to raise their real gross domestic product forecast for China this year to 4.9% from 4.7%.

“While we have improved our cyclical view due to more vigorous and coordinated stimulus measures in China, our structural view of China's growth has not changed,” the analysts wrote in a note to clients.

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“The '3D' challenges – worsening demographics, a multi-year deleveraging trend and the push to de-risk the global supply chain – are unlikely to be reversed by the latest round of policy easing.”

China's third-quarter GDP data is due on Friday.

Elsewhere, currency moves were largely subdued, with the U.S. dollar continuing to receive support from reduced bets on an outsized Federal Reserve interest rate cut next month.

Against a basket of currencies, the greenback hovered near a seven-week high of 103.03.

Traders have priced out any chance of a 50 basis point Fed rate cut in November after data last week showed consumer prices rose slightly more than expected in September and recent economic news also underscored the strength of the labor market.

Sterling fell 0.13% to $1.3050, while the euro fell 0.11% to $1.0923.

A reading on UK inflation and a European Central Bank interest rate decision are due later this week.

(Reporting by Rae Wee; Editing by Christopher Cushing)