JAKARTA, May 9 (Reuters): Asian markets were in a sea of red on Mon
JAKARTA, May 9 (Reuters): Asian markets were in a sea of red on Monday as stricter lockdowns in China and US rate hike plans stoke global growth worries, while inflation in Indonesia accelerated to a four-year high.
China’s yuan plunged 0.9% to trade at 6.726 to the dollar, an 18-month low, and Indonesia’s rupiah weakened 0.4% to over a nine-month low. India’s rupee also dropped 0.7% to hit a record low.
Indonesian stocks sank over 4%, after the market reopened from a week-long holiday, putting them on track for their worst session in eight months.
Data showed Indonesia’s economy grew 5.01% in the first quarter, marginally faster than expected, as pandemic curbs eased. However, inflation in April hit its highest since 2017.
Analysts at OANDA and Maybank said earlier in the day that higher inflation rate would increase the pressure on Bank Indonesia to hasten its reluctant hiking timetable.
The country recorded over a threefold increase in foreign visitors in March as it opened up following COVID lockdowns, but the numbers still remained well below pre-pandemic levels.
China also reported its weakest export growth in two years and flat imports for March, as tighter pandemic curbs slowed down economic activity.
“Investors continue to re-appraise the prospects for China’s economy and asset markets… USD/CNY losing its anchor has added to global FX volatility and weighed on China-correlated currencies,” analysts at ING said in a note.
Meanwhile, a presidential election in the Philippines also drove some cautionary selling in the peso, according to analysts at Maybank, who dub former senator and congressman Ferdinand Marcos Jr, projected to win the elections, the less market-friendly of the two candidates.
The peso shed 0.6% in its worst session in a month, but Maybank analysts added that such near-term caution could fade in the months ahead if Marcos picks a credible economic team.
Markets worldwide remained subdued on fears that the aggressive rate hikes planned by the U.S. Federal Reserve may end up driving the world’s largest economy into a recession that could spread globally.
Yields in Asia mirrored movements in the United States, with yields in Singapore adding 107 basis points to 2.894%, their highest since 2015. Yields in Indonesia also rose 157 basis points to a near 2-year high of 7.156%.
“The drivers are not the domestic or even regional conditions. It is this global bond yield move,” says Alvin Tan, Head of Asia FX strategy at RBC Capital Markets, adding that US inflation data due on Wednesday might provide more cues to markets.
Higher yields weighed on currencies and stocks across the region, with the Thai baht retreating 0.6% to its lowest level in five years, and the Singapore dollar down 0.5% to its lowest level since July 2020.
All stock markets in the region were down, with Korean stocks falling 1.3% to a two-month low, and Indian stocks sliding 0.4%. – Reuters
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