Asian stocks were mixed on Thursday, with many subdued by news that officials in parts of Shanghai were imposing new Covid-19 restrictions, while investors worried about the impact of potential rate hikes ahead of a European Central Bank meeting later in the day.
Asia’s cautious tone persisted into European markets, where stock futures pointed to a lower open across the board. Moves were relatively muted ahead of the ECB meeting, which is set to bring an end to the bank’s Asset Purchase Programme and signal rate hikes to combat rising inflation. Many investors were holding to the sidelines.
As investors guess at the size and pace of ECB tightening, they are also awaiting US consumer price data on Friday that the White House has said it expects to be “elevated”.
While Asian markets have risen around 9% from nearly two-year lows touched last month, investors remain worried that central bank policy tightening to control inflation could spark an economic slowdown.
Chinese Shares Snap Positive Streak
Chinese shares snapped a four-session gaining streak to close down, with growth stocks leading declines, after parts of Shanghai began imposing new Covid-19 restrictions.
The blue-chip CSI300 index ended 1.1% lower at 4,175.67, while the Shanghai Composite Index lost 0.8% to 3,238.95. The Hang Seng index fell 0.7% to 21,869.05, while the China Enterprises Index lost 1.0% to 7,606.35 points.
Residents of Shanghai’s Minhang district were ordered to stay home for two days in a bid to control coronavirus transmission risks, with daily national Covid cases also rising slightly during the week.
“The uncertainty over Covid outbreaks means Chinese equities are still likely to be susceptible to start-stop cycles,” BNP Paribas analysts said in a note.
China’s exports grew at a double-digit pace in May, shattering expectations, while imports expanded for the first time in three months as Shanghai and Beijing relaxed curbs.
To revive confidence among multinational companies, Shanghai officials are holding multiple meetings with foreign firms and easing a key border requirement for overseas workers.
Despite a decline, foreign investors were net buyers of China stocks on Thursday, with Refinitiv data showing inflows of more than 6.2 billion yuan ($930 million) through the Stock Connect programme.
Tech giants listed in Hong Kong closed down 1.4%, after jumping 4.8% on Wednesday following a series of positive developments in the sector.
“The market is still concerned about the regulation of data, but based on recent good news, the clampdown over the past year seems to have come to an end,” said Linus Yip, chief strategist at First Shanghai Securities.
Nikkei Ends Flat
Japan’s Nikkei index ended Thursday little changed after a rollercoaster session that at one point took it to a five-month high, before the drag from shippers and chip shares countered gains by energy companies and automakers.
The Nikkei closed at 28,246.53, just 0.04% higher, after rallying as high as 28,389.75 less than an hour to the bell, a level not seen since January 18.
The Nikkei had rallied close to 10% over the four weeks to Wednesday, leaving investors wondering about its next move.
Meanwhile, the broader Topix ended lower by 0.05% at 1,969.05.
“From a technical point of view, the Nikkei’s recent rally seems heated, and a correction at any moment wouldn’t be unusual, but right now stocks are getting support from the yen’s steep decline,” Nomura Securities strategist Maki Sawada said.
Car and motorcycle manufacturers have rallied amid the yen’s rapid decline to ever deeper two-decade lows, boosting the value of US sales. The currency sank as low as 134.56 per dollar on Thursday for the first time since February 2002.
Korean Shares Flat, Nifty Up in India
South Korean shares also ended flat as optimism from stronger-than-expected exports data from China was countered by concerns around a key US inflation reading. The Korean won weakened, while the benchmark bond yield ticked up.
The benchmark KOSPI ended slightly lower by 0.71 points, or 0.03%, at 2,625.44, after falling as much as 0.74% to hit the lowest intraday level in two weeks.
Indian shares rose late on Thursday, with investors shedding fears that aggressive policy tightening by central banks could stifle global economic growth.
The NSE Nifty index ended the day 121.85 points up at 16,478.1, while the BSE Sensex rose 427.79 points to 55,320.28.
Australian Shares Sink
Australian shares fell to near four-week closing lows on Thursday, with banks tumbling further as the central bank’s largest interest rate hike in more than two decades raised concerns about the housing market.
The S&P/ASX 200 index ended 1.42% lower at 7,019.7, down for a third session in four. The so called “big four” banks slipped between 2.3% and 3.7%, as the central bank’s rate hike earlier this week sparked fears of a sell-off in the housing market.
Financials fell for the fourth straight session, closing 2.1% lower, while miners were also among the top drags, falling 2.4% on weak iron ore prices as reduced profitability at Chinese steel mills weighed on investor sentiment.
Iron ore behemoths BHP and Rio Tinto dropped 2.4% and 1.2%, respectively. Bucking the trend, energy stocks climbed 0.56% and were the only gainers on the benchmark, with oil and gas major Woodside Energy group up 1.9%.
Meanwhile, Crown Resorts jumped nearly 2% after gambling regulators cleared private equity giant Blackstone to run the troubled casinos of Crown in the country’s two largest cities.
• Reuters with additional editing by Jim Pollard