HONG KONG, April 19 — Asian stocks were digesting growth concerns in China and rising interest rates in the United States today with Hong Kong dropping sharply while Japan edged higher on the back of a plummeting yen.
Chinese growth numbers for the first quarter of 2022 exceeded expectations yesterday but the government warned of “significant challenges” ahead with key economic hubs in the throes of Covid-19 lockdowns.
Millions of residents are still cloistered in their homes in economic centre Shanghai with restrictions — which have also hit tech hub Shenzhen and the north-eastern grain basket of Jilin — shutting supply lines.
Investors were left weighing whether attempts to lift the economy by Chinese policymakers — who have held off cutting interest rates — would offset Beijing’s zero-Covid policies.
“The focus in Asia is on mainland policy easing to cushion the impact of lockdowns,” Stephen Innes at SPI Asset Management said, adding that while first-quarter growth was marginally better than predicted, “there was no positive follow-through in China-sensitive assets”.
“Reopening cities is the only fix to drive credit growth, which could translate into a sustainable economic rebound that supports equity markets and a load of other China proxy assets,” he said.
Japan’s Nikkei 225 made healthy gains, with South Korea, Taiwan, India, and Australia all edging upward.
But Hong Kong plummeted by its largest margin in three weeks after a four-day holiday hiatus.
The Hang Seng Index shed more than 2.7 per cent before recovering slightly to around 2.4 per cent down, with the Shanghai Composite Index also slipping.
The impact of monetary policy tightening in the United States to combat inflation was another variable watched closely by investors, with major European markets in London, Paris, and Frankfurt resuming trade after a lengthy holiday break in the red today.
Based on inflation concerns, pandemic lockdowns in China, and the war in Ukraine, the World Bank last week downgraded its forecast for global growth this year, and the IMF is expected to do the same when it releases its updated forecasts today.
“Its current estimate for 2022 is 4.4 per cent which it set in January, with Europe and Central Asia likely to take the brunt, due to the Russian war in Ukraine, and Covid restrictions, respectively,” said Michael Hewson, chief market analyst at CMC Markets UK.
“With the return of European markets from the long Easter weekend break we look set to get off to a negative start in the wake of yesterday’s lower finish for US markets, amidst concerns that the growth downgrades seen yesterday could well be the first of many.”
Oil prices declined after initial gains today, a day after Libya’s National Oil Corporation announced the closure of operations after staff in the key export terminal of Zueitina and the Al-Sharara oil field were blocked from working.
The move will prevent Libya from exporting almost a quarter of its 1.2 million barrels per day of production.
And the Japanese yen plunged, reaching 128 to the dollar, yet another 20-year low today, reflecting the continued accommodation of Japan’s monetary policy while US policymakers move to hike interest rates.
“Although the effects of the lower JPY are a net positive for the Japanese economy, positive effects from higher export volume and an increase in inbound foreign tourists have waned and effectively gone,” UBS said in a note.
“More importantly, negative effects are mainly borne by households with negative real income and domestic-oriented industries (mainly small firms) with higher import costs.”
Key figures around 0745 GMT
Tokyo — Nikkei 225: UP 0.69 per cent at 26,985.09 (close)
Shanghai — Composite: DOWN 0.05 per cent at 3,194.03 (close)
Hong Kong — Hang Seng Index: DOWN 2.39 per cent at 21,003.29
Euro/dollar: DOWN at US$1.0796 from US$1.0802
Pound/dollar: DOWN at US$1.3014 from US$1.3023
Euro/pound: UP at 82.96 pence from 82.87
Dollar/yen: UP at 128.08 yen from 126.54 yen
Brent North Sea crude: DOWN 0.47 per cent at US$112.26 per barrel
West Texas Intermediate: UP 0.66 per cent at US$107.16 per barrel
New York — Dow: DOWN 0.1 per cent at 34,411.69 (close)
London — FTSE 100: DOWN 0.24 per cent at 7,598.419 — AFP
