Most Asian stocks moved in a flat-to-low range on Monday, while Chinese markets fell sharply after data showed that economic growth in the country slowed substantially through the second quarter.

Regional trading volumes were somewhat slim, on account of a market holiday in Japan and a trading halt in Hong Kong, as the city faces its first major typhoon this year.

A rally in Asian technology stocks, triggered by waning expectations for more U.S. interest rate hikes this year, now appeared to have run out of steam, with concerns over slowing growth in the region’s largest economy taking the helm.

Chinese stocks sink on weak Q2 GDP, waning rate cut bets
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were by far the worst performers in Asia, down over 1% each after data showed that economic growth slowed in the second quarter.

China’s Gross Domestic Product (GDP) rose 0.8% in the second quarter from the first. The reading was higher than expectations for growth of 0.5%, but substantially weaker than the 2.2% jump recorded in the first quarter.

The year-on-year GDP reading missed expectations, growing 6.5% against expectations of 7.3%. But the reading was largely driven by a weak basis for comparison from 2022, when China was still maintaining its strict zero-COVID policy.

Monday’s data showed that an economic recovery in Asia’s largest economy was running out of steam, and that the government will likely need to roll out more stimulus measures in the coming months.

But bets on more interest rate cuts in the country were also dented, as the People’s Bank of China kept its medium-term lending rates steady on Monday. The move indicates that the PBOC will also hold its benchmark Loan Prime Rate steady later this week.

Weakness in China bodes poorly for other Asian economies, given their dependence on the country as a trading hub. South Korea’s KOSPI fell 0.3% on Monday, while Australia’s ASX 200 edged 0.1% lower.

The Taiwan Weighted index rose slightly, while Philippine shares led losses across Southeast Asia with a 0.6% decline.

Indian stocks at record highs, earnings in focus
Futures for India’s Nifty 50 index pointed to a flat open for local stocks, after both the Nifty and the BSE Sensex 30 notched record highs on Friday.

Optimism over the Indian economy, heavy exposure to technology stocks, and some positive earnings have been major drivers of an Indian stock rally over the past month.

A string of major financial, industrial, and consumer sector earnings are due this week, and are set to shed more light on local firms amid a fairly robust economic background.

But any disappointment in earnings may trigger steep losses in Indian stocks, with analysts warning that valuations are already stretched.