Jan 27 (Reuters) – South Korea’s share market fell to its lowest level in nearly 14-months on Thursday, leading Asia’s emerging markets lower after the U.S. Federal Reserve signalled it is ready to kick off a round of monetary policy tightening to tame inflation.
Regional currencies were broadly weaker against a strong dollar, as the prospect of imminent hikes spooked equity markets and drove bond yields higher.
Shares in Seoul (.KS11) and Shanghai fell 3.4% and 0.9%, respectively, while the South Korean won , Thai baht and China’s yuan fell between 0.4% and 0.6%.
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In its latest policy update, the Fed said it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases in March. read more
Central banks in Asia have not been pressured to pursue interest rate hikes as aggressively as their peers in Europe and Latin America.
However, the prospect of higher U.S. interest rates have left regional policymakers balancing the need to protect economic recovery while stemming potential outflows that could weaken current account surpluses.
“With the somewhat hawkish signals by the Fed … there may be greater pressure for central banks in the region to act on curbing inflationary pressures as well,” 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 settings in its first out-of-cycle move in seven years. read more
Bank Indonesia’s governor Perry Warjiyo has said that early signs of inflation might be seen at the end of this year and would be the basis for the central bank to begin 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. Shares (.PSI), however, were down 0.2% on 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 picking up as the COVID-19 infection rate slowed ahead of the Christmas holidays.
“While an Omicron wave means the economy’s continued strong performance in Q4 is unlikely to be repeated this quarter, we think growth will pick up again before long,” Alex Holmes, Asia Economist at Capital Economics.
“That said, the overall recovery has a long way to go, and the economy will remain in catch-up mode throughout 2022.”
Separately, a Reuters Poll showed that Taiwan’s gross domestic product, scheduled to arrive later in the day, is expected to have expanded at a slightly faster pace in the fourth quarter supported by strong tech exports. read more
HIGHLIGHTS
** South Korean shares (.KS11) fall as much as 3.5%, their lowest since Dec. 1, 2020
** Thailand’s baht eyes worst session since Jan. 6
** China Evergrande shares (3333.HK) fall as much as 9.6% to hit their lowest in nearly two-weeks as its restructuring roadmap disappoints creditors read more
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Reporting by Harish Sridharan in Bengaluru; editing by Richard Pullin
Our Standards: The Thomson Reuters Trust Principles.
