S.Korea leads Asian stock markets lower as the Fed marks rate hikes

  • Regional stocks, currency weakened on hawkish Fed
  • Early signs of inflation can be seen at the end of the year – Indonesia c.bank
  • Philippine GDP for Q4 exceeds expectations
  • Taiwan’s preliminary Q4 GDP is expected after 0800 GMT

January 27 (Reuters) – South Korea’s stock market fell to its lowest level in almost 14 months on Thursday, leading to a fall in Asia’s emerging markets after the US Federal Reserve signaled its readiness to launch a round of monetary tightening for to tame inflation.

Regional currencies were broadly weaker against a strong dollar as the prospect of impending gains frightened stock markets and pushed up bond yields.

Shares in Seoul (.KS11) and Shanghai fell 3.4% and 0.9% respectively, while the South Korean won, Thai baht and Chinese yuan fell between 0.4% and 0.6%.

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In its latest policy update, the Fed said it is likely to raise interest rates in March, confirming plans to close its bond purchases in March. Read more

Central banks in Asia have not been pressured to pursue rate hikes as aggressively as their peers in Europe and Latin America.

However, the prospect of higher US interest rates has left regional policy makers to balance the need to protect the economic recovery while curbing potential outflows that could weaken the current account surplus.

“With the somewhat hawkish signals from the Fed … there may be greater pressure on the central banks of the region to also act to curb inflationary pressures,” Yeap Jun Rong, market strategist at IG, said in a note.

Earlier this week, Singapore’s central bank surprised markets by tightening its monetary policy stance in its first out-of-cycle move in seven years. Read more

Bank of Indonesia Governor Perry Warjiyo has said early signs of inflation can be seen by the end of this year and will be the basis for the central bank to start considering raising interest rates. Read more

Meanwhile, data from the Philippines showed that the country’s economy expanded faster than expected in the fourth quarter of 2021. However, equities (.PSI) fell 0.2% due to a broader market weakness. Read more

The Southeast Asian country’s gross domestic product (PHGDP = ECI) rose 7.7% in the December quarter, with consumer spending rising as the COVID-19 infection rate fell ahead of the Christmas holidays.

“While an Omicron wave means that the economy’s continued strong performance in Q4 is unlikely to be repeated this quarter, we believe growth will pick up again soon,” said Alex Holmes, Asia Economist at Capital Economics.

“That said, the overall recovery has a long way to go and the economy will remain in a catch-up state through 2022.”

Separately, a Reuters survey showed that Taiwan’s gross domestic product, scheduled to arrive later in the day, is expected to have grown at a slightly faster pace in the fourth quarter backed by strong technology exports. Read more


** South Korean equities (.KS11) are down as much as 3.5%, their lowest since December 1, 2020

** Thailand’s baht eyes worst session since January 6th

** China Evergrande stock (3333.HK) is down as much as 9.6% to reach its lowest point in almost two weeks as its restructuring plan disappoints creditors. Read more

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Reporting by Harish Sridharan in Bengaluru; editing by Richard Pullin

Our standards: Thomson Reuters Trust Principles.


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