Asia report: Most markets fall as China prepares to raise budget deficit

(Sharecast News) - Asia-Pacific markets closed mixed on Tuesday as investors awaited the US Federal Reserve's interest rate decision and assessed developments in China's fiscal policy. Chinese leaders announced plans to increase the country's budget deficit in 2025, aiming to sustain economic growth at around 5% next year.

"Asian markets experienced mixed performance overnight, as investors await a series of interest rate decisions from central banks, including the Federal Reserve, scheduled for this week," said Patrick Munnelly at TickMill.

"Chinese equity markets showed modest gains; reports suggest that Beijing aims to set a growth target of around 5% for the coming year, alongside increasing the budget deficit to 4% of GDP.

"Chinese economic activity remained weak in November, with industrial production steady at 5.4% year-on-year, but retail sales growth fell to 3.0% year-on-year from 4.8% in October, below the expected 5%."

Munnelly noted that consumer confidence in the country remained low, impacting consumption, which is tied to the property market outlook.

"House price declines slowed, with new homes at -6.1% year-on-year and used homes at -8.5%.

"Activity is improving in tier-one cities, but there is a significant overhang of unsold homes - 60 million to 80 million - nationwide.

"Property investment is decreasing, and while there are pockets of interest, the market needs to reach equilibrium between supply and demand for stability."

Most markets in the red, Australasia goes against the grain

Japan's Nikkei 225 dipped 0.24% to 39,364.68, while the broader Topix fell 0.37% to 2,728.20.

Weakness in semiconductor stocks weighed on the market, with chip-testing equipment maker Advantest plunging 9.35%.

Furukawa Electric and Nissan Motor also declined, losing 4.03% and 3.93%, respectively.

In China, the Shanghai Composite dropped 0.73% to 3,361.48, and the Shenzhen Component shed 0.35% to 10,537.43.

Losses in Shanghai were led by sharp declines in smaller-cap stocks, with Saurer Intelligent Technology, Fujian Dongbai Group, and Shanghai Shibei Hi-Tech Co each falling over 10%.

Hong Kong's Hang Seng Index slid 0.48% to 19,700.48, reflecting pressure in health and consumer stocks.

Zhongsheng Group Holdings lost 3.4%, JD Health International declined 3.24%, and Sinopharm Group dropped 2.93%.

South Korea's Kospi 100 saw the sharpest regional loss, down 1.44% to 2,448.53.

Battery and materials stocks weighed heavily, with Kumyang falling 10.3%, Posco Future M dropping 8.24%, and EcoPro Materials down 6.62%.

Australia bucked the trend, with the S&P/ASX 200 gaining 0.78% to close at 8,314.00.

Property and biotech stocks led the charge, as Pexa Group surged 8.2%, Digico Infrastructure REIT climbed 7.21%, and Mesoblast rose 6.01%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 also posted gains, rising 0.91% to 12,914.30.

Retailer KMD Brands led the market higher with a 7.59% gain, followed by Mercury NZ and Skellerup Holdings, up 4.75% and 4.6%, respectively.

In currency markets, the dollar was last 0.23% weaker on the yen to trade at JPY 153.80, while it strengthened 0.52% against the Aussie to AUD 1.5778, and advanced 0.4% on the Kiwi, changing hands at NZD 1.7365.

Oil prices extended declines, with Brent crude futures last down 0.77% on ICE at $73.34 per barrel, and the NYMEX quote for West Texas Intermediate dropping 1% to $70.00.

China set to raise budget deficit, consumer confidence slips in Australia

In economic news, Reuters reported that China was set to raise its budget deficit to 4% of GDP in 2025, marking a record high, as leaders in Beijing aimed to sustain economic growth at around 5%.

The proposed increase, up sharply from the current 3% target, would translate to roughly CNY 1.3trn yuan (£140.67bn) in additional government spending.

Reuters said the decision, apparently made at last week's Central Economic Work Conference, was still to be officially announced.

Meanwhile, Australian consumer confidence fell in December amid persistent inflation, high interest rates, and global economic uncertainty.

The Westpac consumer sentiment index declined 2% from November to 92.8 points, indicating continued pessimism among households.

While sentiment had improved over the course of the year, it remained below the 100-point threshold that separates optimism from pessimism.

Elsewhere, Singapore reported a stronger-than-expected recovery in non-oil domestic exports (NODX) for November, driven by gains in electronics.

NODX rose 3.4% year-on-year, reversing October's 4.7% contraction and surpassing forecasts for a 0.7% decline.

On a month-on-month basis, exports surged 14.7%, far exceeding expectations of an 8% increase and recovering sharply from a 7.5% drop the previous month.

Reporting by Josh White for Sharecast.com.