Asian stocks slumped on Friday after China doubled down on its ‘zero-Covid’ policy’ sparking fears over growth in the world’s No2 economy.
Equities tumbled across the region following a Wall Street rout and fuelled by worries over China’s Covid situation and economic slowdown, and also rising interest rates, surging inflation and the war in Ukraine.
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 2.87% to its lowest level since March 16, the day when Chinese vice premier Liu He boosted shares by pledging to support markets and the economy.
Chinese blue chips shed 2.53%, the Hong Kong benchmark lost close to 4% and China’s yuan tumbled to an 18-month low in both onshore and offshore markets.
China said it will fight any comments and actions that distort, doubt or deny the country’s Covid-19 response policy, state television reported on Thursday, after a meeting of the country’s highest decision-making body.
Investors said that appeared to rule out any easing in the zero-Covid policy, which is slowing Chinese economic growth and snarling global supply chains.
“The silver lining is the expectation that new Chinese fiscal measures could come out over the weekend,” Dickie Wong, director of research at Hong Kong brokerage Kingston Securities, said.
“That’s the only thing giving Asian markets some support at their current low valuations.”
Hang Seng Dives
The Hang Seng Index fell 3.81%, or 791.44 points, to 20,001.96. The Shanghai Composite Index dipped 2.16%, or 66.20 points, to 3,001.56, and Shenzhen Composite Index slumped 1.71%, or 32.27 points, to 1,859.39.
Tokyo stocks closed higher on bargain-hunting but gains were limited as investors remained cautious ahead of the release of US jobs data.
The benchmark Nikkei 225 index rose 0.69%, or 185.03 points, to end at 27,003.56, while the broader Topix index added 0.93%, or 17.56 points, to 1,915.91.
Sydney, Seoul, Bangkok, Singapore, Wellington, Taipei and Manila also tanked, while London, Paris and Frankfurt were in the red in early trade.
Indian stocks dropped too with Mumbai’s signature Nifty 50 index down 1.63%, or 271.40 points, to close at 16,411.25.
US Dollar Soars
Meanwhile, the US dollar hit 20-year highs heading for its fifth straight week of gains after the Federal Reserve raised rates by 50 basis points this week. The market is pricing in a more than 90% chance of a 75 bps hike in June, according to Refinitiv data.
US stock index futures dropped 0.6% after the Dow Jones Industrial Average and the S&P 500 both slid more than 3% overnight, and the Nasdaq Composite shed 4.99% in its biggest single-day plunge since June 2020.
European stocks fell more than 1% to their lowest since mid-March and were heading towards their worst week in two months. Britain’s FTSE dropped 0.8%.
US yields are rising on expectations of a fast pace of rate hikes. The yield on US 10-year notes was last at 3.063% after crossing 3.1% overnight for the first time since November 2018.
Oil prices shrugged off concerns about global economic growth as worries about tightening supply underpinned prices ahead of the European Union’s impending embargo on Russian oil.
Brent futures rose 0.29% to $111.78 a barrel. US crude rose 0.23 % to $108.51 a barrel.
Key figures at around 0810 GMT
Hong Kong – Hang Seng Index > DOWN 3.8% at 20,001.96 (close)
Shanghai – Composite > DOWN 2.2% at 3,001.56 (close)
London – FTSE 100 > DOWN 0.5% at 7,461.80
Tokyo – Nikkei 225 > UP 0.7% at 27,003.56 (close)
West Texas Intermediate > UP 0.4% at $108.70 per barrel
Brent North Sea crude > UP 0.4% at $111.39 per barrel
New York – Dow > DOWN 3.1% at 32,997.97 (close)
- Reuters with additional editing by Sean O’Meara