SEOUL, South Korea – Asian stock markets sank Wednesday after a highly anticipated meeting of Chinese leaders did not announce bold reforms to overhaul a growth model that is running out of steam. European markets were muted.
Communist Party leaders in Beijing pledged to promote market forces in the country’s state-dominated economy after the four-day meeting wrapped up late Tuesday. But in a disappointment for reform advocates, they failed to announce dramatic changes such as curbing the dominance of state industry, extending property rights to farmers or relaxing the one child birth control policy.
The ruling party said market forces will play a “decisive role” in China’s economy, an upgrade from “core role” assigned to the market in party policy over the past two decades, and flagged 2020 as a timeframe for changes.
“It’s going to be a slow moving ship,” said Chris Weston, chief market strategist at IG in Melbourne, Australia. The investment community is encouraged that a bigger role is promised for private business but “simply wants more meat to sink its teeth into,” he said.
China has become the world’s second biggest economy after the U.S. through growth based on exports and investment. However, reform advocates say further progress will require private enterprises having a bigger role at the expense of politically favoured state companies.
Major European benchmarks were weaker in early trading. Britain’s FTSE 100 declined 0.6 per cent to 6,689.71 and France’s CAC-40 inched down 0.1 per cent to 4,259.53. Germany’s DAX shed 0.2 per cent to 9,060.81.
Futures indicated that U.S. stocks were set for another day of declines. S&P 500 futures lost 0.2 per cent and Dow Jones futures dropped out 0.1 per cent.
In Asia, China’s Shanghai Composite plunged 1.8 per cent to 2,087.94 and Hong Kong’s Hang Seng sank 1.9 per cent to 22,463.83. Tokyo’s Nikkei shed 0.2 per cent to 14,567.16 and South Korea’s Kospi lost 1.6 per cent to 1,963.56. Australia’s S&P/ASX 200 fell 1.4 per cent to 5,319.2.
Stocks in Taiwan, Indonesia and Singapore also dropped.
Confirmation hearings for Janet Yellen as the new Federal Reserve chief on Thursday could provide a fresh cue for financial markets. Investors will look to her testimony for clues about when the Fed will begin reducing its massive monetary stimulus that has propped up the world’s largest economy.
Yellen has been tapped to replace Ben Bernanke as Fed chairman at the end of January.
In energy markets, benchmark crude for December delivery was up 27 cents to $93.32 in electronic trading on the New York Mercantile Exchange. The contract plunged $2.10 to $93.04 on Tuesday as traders anticipated another increase in U.S. crude supplies.
The euro was little changed at $1.3434 from $1.3433 late Tuesday. The dollar fell to 99.38 yen from 99.58 yen.