Sunday, February 25, 2024

Asian Markets Slide as Investors Parse China Trade Data and RBA Rate Hike

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Asian stock markets mostly declined on Tuesday as investors assessed the implications of weaker-than-expected Chinese trade figures along with another interest rate hike from the Reserve Bank of Australia.

South Korea’s Kospi led regional losses, dropping 2.33% to close at 2,443.96. Japan’s Nikkei 225 fell 1.34% to 32,271.82. Hong Kong’s Hang Seng and China’s Shanghai Composite were also down over 1.5% each. Meanwhile, Australia’s S&P/ASX 200 ended 0.29% lower at 6,977.1 even after the RBA raised rates 25 basis points as expected.

The downbeat trading session followed modest gains on Wall Street overnight. The S&P 500 and Dow Jones Industrial Average eked out small gains for their sixth straight positive sessions, while the Nasdaq Composite extended its win streak to seven days.

Investors are digesting China’s latest trade data which showed exports falling more than forecast in October. Exports dropped 6.4% year-over-year, worse than expectations for a 3.3% decline. This highlights ongoing weakness in global demand.

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However, China’s imports surprisingly rose 3% versus forecasts for a 4.8% drop, perhaps indicating some domestic resilience. Nevertheless, the report exacerbates concerns about faltering growth both within China and across major economies confronting rising rates, elevated inflation and geopolitical tensions.

RBA Rate Hike Already Priced In

The RBA raised its benchmark interest rate 25 basis points to 2.85% at its November policy meeting, as universally expected. The central bank has lifted rates a total of 275 basis points so far this year from an all-time low of 0.1% but is now approaching the end of its tightening cycle.

In the accompanying statement, RBA Governor Philip Lowe reiterated inflation remains too high despite likely having peaked. He indicated rates may still need to rise further to ensure inflation returns to the bank’s 2–3% target range.

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However, markets had already fully priced in a quarter-point hike and don’t expect rates to ultimately rise much beyond 3.6%. As a result, investors shrugged off the announcement from a policy perspective.

tech Stocks Drag Korean Shares Lower

Korea’s equity market gave back some of its steep gains from Monday when the KOSPI surged over 3%. That session marked its best day since March 2020 after short selling was restricted. But shares fell across the board on Tuesday, with decliners far outweighing advancers.

Chipmaker SK Hynix dropped 5% and internet firm Naver lost 2.7%. Top automaker Hyundai Motor slid 3%. Setting the pace were tech plays Samsung Electronics and LG Energy Solution which plunged over 7% each.

The tech-heavy KOSDAQ index tumbled even more, shedding 4.5%. Analysts noted profit-taking pressures and foreign selling of Korean stocks contributed to the widespread sell-off.

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Japan’s Nikkei 225 also slid as the yen rebounded from multi-decade lows, weighing on exporters. Toyota declined 2.6% and Sony lost 3.8%. SoftBank Group plunged over 5% after reporting a $6 billion loss at its Vision Fund.

Key Earnings Due

Looking ahead, Hong Kong-listed firms Alibaba and will report earnings on Tuesday. Their results will offer critical insight into Chinese consumer demand amid a weakening economy and ongoing COVID restrictions.

Meanwhile in Australia, the focus will turn to employment data on Thursday after the RBA decision proved a non-event. Jobs growth is expected to moderate but remain solid as the country grapples with worker shortages despite rising rates.

On Friday, Japan will release preliminary Q3 GDP figures forecast to show modest expansion. However, analysts warn underlying weakness persists and the economy could contract next quarter as global headwinds continue hampering growth

Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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