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Concerns over resurgent inflation and higher interest rates dented regional markets, triggered chiefly by an overnight bounce in oil prices, which analysts warn could factor back into higher inflation. Several Asian countries also released hotter-than-expected inflation readings this week.
Fears of a Chinese economic slowdown persisted after the country released mixed readings on business activity this week. Focus is now on key trade data, due on Thursday, for more cues on the country, with investors also growing impatient with Beijing’s pace of stimulus support.
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.5% and 0.3%, respectively, while Hong Kong’s Hang Seng index shed 0.3%. Losses in the Hang Seng were limited by strength in property stocks, as embattled developer Country Garden Holdings (HK:2007) avoided another potential default this week.
Oil and gas stocks also helped limit losses in China, after crude prices hit a 10-month high on more supply cuts from Saudi Arabia and Russia.
Still, concerns over China spilled over into Australia, with the ASX 200 losing 0.5%. While data showed that Australia’s economy grew slightly more than expected in the second quarter, its pace of growth remained glacial amid increasing pressure from high inflation and interest rates.
South Korea’s KOSPI lost 0.4%, while futures for India’s Nifty 50 index pointed to a mildly negative open. A spike in U.S. Treasury yields also weighed on heavyweight Asian technology stocks, as markets awaited a string of Federal Reserve speakers this week.
Japan’s Nikkei 225 index vastly outperformed its regional peers for the day, rising 0.8%, while the broader TOPIX added 0.5% and traded at an over 33-year peak.
Sentiment towards local stocks was aided by comments from BOJ board member Hajime Takata, who said that he saw some signs of progress towards increasing Japanese inflation and wage growth.
But Takata reiterated that the bank needed to “patiently maintain the current massive monetary stimulus”- indicating that the BOJ is likely to keep its ultra-loose policy in the coming months, to further cement higher inflation and wage growth.
This makes Japan a major outlier among other major economies, which are all struggling with rising interest rates. This dissonance had also spurred a sharp rally in Japanese stocks earlier this year, and has kept them relatively well-bid in recent months.
Strong quarterly earnings and steady foreign buying also boosted Japanese stocks this year.
