In today’s trading session, the Asian Market shared mixed movements following a period of relative stability in US stock indexes, as investors awaited potential market-moving reports.

Leading the charts is Hong Kong’s Hang Seng index, which surged by 1.7% trading at 17,115.94 while the Shanghai Composite index which plummeted by 0.8% trading at 3,026.11 after Fitch Ratings changed its outlook towards China’s public finances. 

Fitch revised China’s sovereign credit rating outlook to negative, citing concerns over public finances amidst its economy’s transition to new growth models, which is accompanied by rising uncertainty.

The downgrade mirrors Moody’s action in December and coincides with Beijing intensifying its efforts to stimulate a sluggish post-Covid recovery in the world’s second-largest economy through fiscal and monetary support measures. 

“Fitch’s outlook revision reflects the more challenging situation in China’s public finance regarding the double whammy of decelerating growth and more debt,” said Natixis Asia-Pacific senior economist Gary Ng. 

“This does not mean that China will default any time soon, but it is possible to see credit polarisation in some LGFVs (local government financing vehicles), especially as provincial governments see weaker fiscal health,” he added.

Fitch anticipates that China’s general government deficit, encompassing infrastructure and other official fiscal activities beyond the headline budget, will increase to 7.1% of GDP in 2024 from 5.8% in 2023. This marks the highest level since 2020 when Beijing’s stringent Covid-19 measures significantly impacted the economy, resulting in a deficit of 8.6%

Elsewhere in Asia, Japan’s Nikkei 225 showed a slight decrease of 0.5% to 39.581.81 and Australia’s S&P/ASX 200 in Sydney went up by 0.3% to, 7,848.50. Whereas India’s Sensex increased by 0.3% and the SET in Bangkok went up by 0.5%.