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Asian Stocks Slip as Growth, Inflation Fears Deepen Gloom

Asia shares stumble with worries over growth in China’s Covid-affected economy continuing to weigh heavy on sentiment

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Asian stock markets round-up.
A man wearing a mask walks past an electronic board showing the Shanghai stock index, the Nikkei index and Dow Jones average outside a brokerage in Tokyo. Photo: Reuters

 

Asian equities fell back on Thursday despite a positive lead from Wall Street after China’s premier delivered a sombre assessment of the country’s economic struggles.

There were some words of comfort from Premier Li Keqiang about how Beijing would work to stabilise the Covid-hit economy and that boosted markets on the Chinese mainland but Hong Kong and Tokyo retreated.

The premier said the world’s number two economy was now, in places, worse off than during the early days of the pandemic, and that spread an air of gloom across trading floors.

 

Also on AF: China Economy Struggles as Shanghai Slowly Re-emerges

 

China stocks ended higher though as traders took comfort in his comments about stabilising the economy but significant gains were out of reach as concerns about growth, inflation and war in Ukraine continue to weigh on sentiment.

“The economic situation in China has reached a point that is not just about higher or lower growth but about preventing potential systemic risk events,” said Alex Wolf, head of investment strategy in Asia at JP Morgan Private Bank.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.6%, taking losses for the month to 5%. 

China’s blue-chip CSI300 index rose 0.3% to 3,993.04, after falling as much as 1.1% in morning trade, while the Shanghai Composite Index gained 0.50% to 3,123.11 points.

Hong Kong stocks slipped and the Hang Seng Index eased 0.27%, or 55.07 points, to 20,116.20 while China’s second exchange put on 0.53%, or 10.25 points, to 1,955.13.

Tokyo’s key Nikkei 225 index closed lower and ended down 0.27%, or 72.96 points, at 26,604.84, while the broader Topix index closed 0.05%, or 1.00 points, higher at 1,877.58.

Indian stocks moved ahead with Mumbai’s signature Nifty 50 index up 0.90%, or 144.95 points, at 16,170.75.

Sydney, Seoul, Taipei and Wellington were all down, while Singapore and Manila edged up. London, Paris and Frankfurt were positive in opening trade.

 

Stagflation a ‘Looming Issue’

“It’s very difficult for investors to navigate this market at the moment with high inflation, slower growth, rising interest rates and concerns about the Chinese [Covid-19] predicament, but also stagflation is looming as a potential issue at the same time,” Ryan Felsman, a senior economist at fund manager CommSec, said.

The falls in Asia contrasted with a more upbeat mood on Wall Street, where the Dow Jones Industrial Average rose 0.6%, the S&P 500 gained 0.95% and the Nasdaq Composite added 1.51%.

The immediate attention is now on Thursday’s US Commerce Department release of its second take on first-quarter GDP, which analysts expect to show a slightly shallower contraction than the 1.4% quarterly annualised drop originally reported.

Elsewhere in Asia, South Korea’s central bank raised interest rates for a second consecutive meeting as it grapples with consumer inflation at 13-year highs.    

After rising on Wednesday following the Fed minutes, the dollar was little changed in Asia trade. It was barely changed against the yen at 127.30, while the euro was almost flat at $1.0675.

The dollar index, which tracks the greenback against a basket of major peers was just 0.13% higher at 102.20. 

Moves in US Treasury yields were also muted. The 10-year yield edged up to 2.781% and the policy-sensitive two-year yield was flat at 2.502%.

Crude oil was steady after a cautious rally this week, with Brent crude flat at $114.03 per barrel and US crude up 0.13% at $110.47. 

 

Key figures at around 0820 GMT

Tokyo – Nikkei 225 > DOWN 0.3% at 26,604.84 (close)

Hong Kong – Hang Seng Index > DOWN 0.3% at 20,116.20 (close)

Shanghai – Composite > UP 0.5% at 3,123.11 (close)

London – FTSE 100 > UP 0.2% at 7,540.95

Brent North Sea crude > UP 0.7% at $114.85 per barrel

West Texas Intermediate > UP 0.8% at $111.21 per barrel

New York – Dow > UP 0.6% at 32,120.28 (close)

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

China’s PBOC Opens Up More Credit to Small Firms

Bank of Korea Raises Rates for Fifth Time in 12 Months

 

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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