BHP, Fortescue and Rio Tinto tumble as China looks to speed up spending
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More news: During the question and answer portion of China's National Development and Reform Commission (NDRC) press conference, chair Zheng Shanjie announced that the Chinese government would speed up spending as it aims to achieve around 5% growth this year.
These spending initiatives included:
- Issuing an investment plan worth 100 billion yuan ($21 billion) for early next year;
- Accelerating local governments’ use of bond money on projects by end of October;
- Issuing ultra-long sovereign bonds in 2025 to support projects;
- Increased subsidies for students; and
- Releasing a new negative list for foreign investment access which shows restricted sectors for foreign investment.
There were no new measures for the housing market. Zheng said the Chinese government would accelerate its effort to absorb existing housing stockpile and that other property policies were currently being planned, Bloomberg reported.
Materials continued to be the worst performing sector on the ASX, down 1.52% at 3:20pm AEDT, as iron ore mining investors pulled back after no major fiscal policies were announced as Zheng largely reiterated economic plans.
Fortescue tumbled 6.19%, while BHP fell 2.8% and Rio dropped 1.52%.
While new measures were widely anticipated, the NDRC does not have a mandate to announce new fiscal measures as that is in the remit of the State Council or Ministry of Finance.
Iron ore stocks fall after China offers no new stimulus package
The news: Iron ore stocks have dropped after China's economic agency failed to provide new stimulus announcements as anticipated at a briefing on Tuesday.
The numbers: Materials was the worst performing sector on the ASX at 1:40pm AEDT, down 2.36%, reversing earlier gains.
Fortescue (-2.2%), Champion Iron (-1.9%) and BHP (-0.5%) were all trading lower.
However, fellow iron ore miner Rio Tinto climbed 0.7% following confirmation that it had approached Arcadium Lithium about a potential acquisition.
Iron ore futures were down 2.4% to USD108.14 ($160.59) in Singapore, having risen more than 3% earlier in the session.
The context: Chinese stocks and iron ore futures soared ahead of a press briefing by China’s top economic planner, as investors braced for new stimulus measures.
However, the chair of China's National Development and Reform Commission (NDRC), Zheng Shanjie, did not offer any new initiatives further to the slew of new growth announcements made over the last fortnight.
Earlier, Citi analysts upgraded their iron ore short-term target to $120, saying the commodity is "highly exposed" to China stimulus measures and was "bearishly positioned" before the latest stimulus announcement. However, they flagged a temporary near-term upside for iron ore in the coming weeks due to the US election, recession risks, and a physical market reaction to higher prices coming to the fore.
Meanwhile, Morgan Stanley analysts said China's resolve to halt its property market decline, and the depth of measures being considered, are "an important pivot for sentiment" at a time when demand is seasonally improving and seaborne supply growth is shifting lower. They noted that they see scope for iron ore to gain further until the end of the calendar year.
