Growth woes, inflation hurt mood in Asia shares, currencies
BENGALURU (June 1): Emerging Asian stocks and currencies were broadly mixed on Wednesday, with sustained strength in the US dollar, higher Treasury yields and inflation worries denting risk appetite.
Global inflation concerns flared anew after data showed euro-area consumer inflation soaring to a record.
“The data will seem to translate into greater pressure for the ECB (European Central Bank) to tighten by a larger 50 basis-point hike in July’s meeting,” Yeap Jun Rong, market strategist at IG, said.
The greenback rose 0.2%, pressuring currencies in Asia. Leading losses were Taiwan’s dollar and China’s yuan, down 0.4% each.
Singapore’s dollar fell 0.3%, followed by the Thai baht that slipped 0.2%.
In contrast, the Indian rupee, the only gainer among currencies, was 0.1% firmer.
India’s economic growth slowed to the lowest in a year in the first three months of 2022, data showed on Tuesday.
Analysts at Nomura said, “We believe the current recovery is unsustainable, owing to higher inflation, tighter monetary policy and global growth slowdown.”
Oil prices rose in early Asian trade after European Union leaders agreed to a partial and phased ban on Russian oil and China ended its Covid-19 lockdown in Shanghai.
“Higher energy prices are a massive headache for central banks worrying about inflation expectations … and EM (emerging markets) investors are weighing the impact on current account and fiscal balances of oil-importing economies,” Stephen Innes, managing partner with SPI Asset Management, said.
Meanwhile, on the radar for Asian investors was a private sector survey on Wednesday that showed China’s factory activity shrank less sharply in May as Covid-19 curbs eased and some production resumed.
Innes said if China continues to increase stimulus support for its economy, “it will create an organic bounce once we do have a more broader reopening in China”, but warned that uncertainty from Covid-19-related restrictions remained.
Equity markets were mixed. Stocks in Malaysia and the Philippines slipped 0.7% and 0.6%, respectively, with Thailand posting a 0.3% drop.
Singapore and Indian stocks were the sole gainers in the region, up 0.6% and 0.2%, respectively.
Trading was thin in Asia on account of market closures in South Korea and Indonesia due to public holidays. Investor focus will largely be on US jobs and unemployment data later this week.
Highlights:
- Singapore’s five-year benchmark yield is up 1.70 basis points at 2.506%
- Top gainers on the Straits Times index: Hongkong Land Holdings up 3.88%, Yangzijiang Shipbuilding Holdings up 2.16%, Genting Singapore up 1.92%
