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Asia Shares Retreat as Putin, Fed Hikes Threat Dampen Mood

Investor appetite across the region was subdued with the US Fed poised to deliver a hefty interest rate rise and Russia upping the ante over Ukraine


Asian stocks dropped
The MSCI All-World index of global shares dropped 0.4% to hit two-month lows.

 

Asian stocks retreated on Wednesday plunging to two, four and six-month lows as nervous traders braced for a hefty rate hike by the US Fed and investors were further unnerved by Russian President Vladimir Putin’s latest threats.

Japanese stocks notched their lowest close in more than two months, tracking declines on Wall Street with key policy meetings due this week from the US Federal Reserve and the Bank of Japan.

To add to the downbeat mood, Russia’s Vladimir Putin on Wednesday ordered the country’s first mobilisation since World War Two, adding to concerns on an already fragile market.

 

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The Nikkei share average settled 1.36% lower at 27,313.13, its lowest closing level since July 19. The broader Topix fell 1.36% too, marking its weakest close since September 7.

“If the Fed implements a 75-basis-point rate hike, as most people expect, the market should avoid upheaval,” said Yasushi Yokoyama of Aizawa Securities, adding that investors are already looking towards the next hike.

The Bank of Japan, however, is considered unlikely to stray from its dovish path. It is the only major central bank not to have hiked interest rates this year, even though inflation has stayed above the bank’s 2% target for five months straight.

The yen was trading slightly lower at just below 144 to the US dollar, within range of a 24-year historical low.

China’s blue-chip stocks closed at their lowest in more than four months, as global peers slid ahead of the Fed’s expected aggressive rate hike.

The CSI 300 Index ended down 0.7%, hitting the lowest level since May 9, while the Shanghai Composite Index dipped 0.17%, or 5.23 points, to 3,117.18 as foreign investors sold Chinese stocks worth more than 3 billion yuan ($430 million) through the Stock Connect scheme.

The Shenzhen Composite Index on China’s second exchange dropped 0.37%, or 7.34 points, to 2,004.31.

 

Yuan Slump Hits China Shares

“Fast depreciation in China’s yuan has [impacted] China’s stock market,” Guosheng Securities analysts wrote in a note, adding that money outflow also dented sentiment.

Shares in healthcare and semiconductor companies led declines, dropping more than 2% each, while consumer staples and tourism shares lost 1.5% and 1.8%, respectively.

Hong Kong-listed tech giants slumped 3%, with e-commerce giant Alibaba Group plunging 3.7% and food-delivery firm Meituan down 3% to become the biggest drag on the benchmark Hang Seng index.

Hong Kong shares of mainland developers, consumer discretionary, and healthcare shed more than 2% each as Hong Kong’s main stock benchmark plunged to its lowest level since mid-March.

The Hang Seng Index dropped 1.79%, or 336.80 points, to 18,444.62.

Elsewhere across the region, stocks also lost ground with Manila’s benchmark index dropping more than 2% to lead losses while shares in Kuala Lampur declined 0.8% and Jakarta equities fell 0.9% to a three-week low. 

Indian stocks retreated with Mumbai’s signature Nifty 50 index down 0.46%, or 82.65 points, at 17,733.60.

 

Putin Accuses West

Globally, stocks fell while safe havens such as government bonds and the dollar rose, as already anxious investors fled risk assets after Putin accused the West of “nuclear blackmail”.

European equity markets dropped sharply, with the benchmark euro zone STOXX 50E index falling by 1% at one point to a two-month low.

European currencies came under fire, with the euro dropping 0.56% to $0.9913 and sterling last down 0.31% at $1.1345, after having touched a new 37-year low at $1.1304.

The dollar index, which measures the currency against six major peers, rallied 0.41% to 110.62, just below a fresh two-decade high of 110.87.

The dollar eased modestly against the Japanese yen, another safe-haven currency, dropping 0.1% to 143.58.

The MSCI All-World index of global shares dropped 0.4% to skim two-month lows, while gold, another traditional safe-haven, gained 0.5% to trade around $1,667.40 an ounce, set for its largest one-day rally in over a week.

 

Key figures

Tokyo – Nikkei 225 < DOWN 1.36% at 27,313.13 (close)

Hong Kong – Hang Seng Index < DOWN 1.79% at 18,444.62 (close)

Shanghai – Composite < DOWN 0.17% at 3,117.18 (close)

London – FTSE 100 < UP 0.53% at 7,230.93 (0955 BST)

New York – Dow < DOWN 1.01% at 30,706.23 (Tuesday close)

 

  • Reuters with additional editing by Sean O’Meara

 

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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