China trade data add to growth woes, Asia stocks rally ends

A near 18 percent slump in Chinese imports added to worries about a slowdown in the world's number two economy on Tuesday, sending Asian equities and emerging currencies lower as investors flocked to safe assets.

A more than week-long rally across regional markets came to an end as profit-takers moved in and worries about China resurfaced with the weak trade figures.

However, there were hopes that leaders in Beijing would use the latest report to unveil a fresh round of stimulus measures, having seen five interest rate cuts since November fail to provide any boost.

Adding to downward pressure across Asia was a sell-off in energy firms that was fuelled by a plunge in oil prices late Monday and the weak data from China, the world's top energy user.

Comments from Federal Reserve officials suggesting the central bank will delay a US interest rate hike until next year were also unable to shore up confidence.

On Tuesday China said imports fell 17.7 percent year-on-year in September as the nation's property sector stuttered, leading to a knock-on effect for the crucial construction industry.

Exports slipped 1.1 percent owing to weak overseas demand.

The Asian giant is the world's leading trader in goods but its slowing economic growth has seen prices plunge for the commodities it uses, fuelling turmoil through producer countries such as Australia.

A slew of data out of Beijing has raised a red flag about the economy, which is growing at around seven percent, its slowest pace in a quarter of a century.

"Import growth remained sluggish, suggesting weakening domestic demand, particularly investment demand," said Yang Zhao, China economist at Nomura Holdings in Hong Kong. "We maintain our view that GDP growth will decline to 6.7 percent in the third quarter."

In morning trade, Shanghai was 0.13 percent lower, Hong Kong lost 0.82 percent and Sydney -- where several firms that rely on trade with China are listed -- shed 0.82 percent. Tokyo was 0.93 percent off by lunch, while there were also losses in Seoul, Taipei and Jakarta.

- Stimulus hopes -

"The data are not good but still acceptable to investors," said Wu Kan, a Shanghai-based fund manager at JK Life Insurance. "As long as the data remain sluggish, the market will be anticipating growth-boosting measures from the government."

World markets suffered their worst quarter for four years in July-September owing to fears about the effects of China's growth slowdown as well as speculation the Fed would hike rates. A Chinese yuan devaluation in August sent shares into a sharp downward spiral.

But they have enjoyed a bumper October so far after the Fed indicated it could hold off a rise in borrowing costs because of the weak global economy.

However, Tim Schroeders, a portfolio manager at Pengana Capital in Melbourne, warned: "China's weakening economy slowdown will continue to weigh on the market.

"We've had fairly significant lift in equities on speculation the Fed will delay raising rates. That's now well priced into valuations."

The risk-off mood weighed on emerging currencies, which have benefited this month from speculation the Fed will not raise rates.

In early exchanges, the Indonesian rupiah was 1.3 percent lower, while the Malaysian ringgit shed 0.9 percent. There were also big losses for the Australian dollar, which relies on resources exports to China.

On oil markets, both main contracts edged up after plunging more than five percent Monday on profit-taking and continuing concerns about a supply glut.

Prices had surged almost 10 percent this month, helped by comments from the OPEC cartel that demand was seen picking up this year and next.

But while US benchmark West Texas Intermediate rose 0.76 percent to $47.46 and Brent climbed 1.10 percent to $50.41 a barrel in morning Asian trade, regional energy giants took a hit.

Sydney-listed Santos lost five percent and Origin was seven percent lower. And in Hong Kong, CNOOC shed more than three percent while PetroChina was almost four percent lower. Inpex sank four percent and JX Holdings lost almost two percent in Tokyo.

Oil has rallied since hitting six-year lows in late August, with last week seeing healthy gains in line with global equities on waning expectations the US Federal Reserve will hike borrowing costs this year, pushing the dollar lower.

-- Bloomberg News contributed to this story --