Thursday, July 7

Asian stocks fall on China lockdown woes, US inflation data eyed


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Asian stocks fell on Friday, spooked by

a fresh COVID-19 alert in Shanghai and Beijing, while Indonesian

stocks took a hit after the world’s biggest palm oil exporter

raised its maximum palm oil export tax.

Sentiment in the region soured on news of renewed curbs in

China as new COVID cases emerged. Multiple districts in Beijing

are shutting down entertainment venues, while most citizens in

Shanghai are facing new rounds of mass testing to prevent a new

outbreak.

Investors were also cautious ahead of US inflation data

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later in the day, which could guide the Federal Reserve’s policy

tightening path.

Jakarta stocks fell 1.5% and were on track for a

weekly fall after three consecutive weeks of gains.

Indonesia raised its maximum export tax for crude palm oil

by 44%, but reductions in another levy are expected to reduce

overall fees to send palm oil products overseas and encourage

export shipments.

Stocks in Seoul also dropped over 1% and were set to

close the week with their worst performance in nearly 5 months,

weighed by rising inflation worries and a truckers strike that

is threatening to severely curtail shipments of raw materials

for semiconductors and petrochemical products.

Benchmark indexes in Malaysia, Singapore,

Philippines, Taiwan and Thailand also

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fell between 0.5% and 3%.

The US Labor Department’s Consumer Price index is due

later in the day and has kept market participants anxiously

waiting for confirmation that decades-high inflation reached its

summit in March and has started to ease.

“Peaking US inflation imaginably provides some relief from

fears of an inadvertent policy-induced hard-landing from Fed

oversteer,” Vishnu Varathan, head of economics and strategy at

Mizuho Bank wrote.

“But this may be insufficient to override capital outflow

risks associated with coincident out-run in EM Asia’s inflation

eroding EM Asia’s real returns in EM Asia.”

Market watchers still expect the Federal Reserve to raise

interest rates by 50 basis points next week, but a cooler

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inflation reading could add to views it is likely to throttle

back tightening later in the year.

“Swings in USD, UST yields are to be expected if actual

reading surprises, but USD dips may still prove to be shallow

given FoMC next week and signs of incremental haven demand given

equity woes, growth concerns,” analysts at Maybank wrote in a

note.

Currencies were, however, mixed across the region against a

steady dollar.

The Thai baht weakened 0.4% and was set to lose

nearly 1% for the week, which saw a shift by the central bank to

a more hawkish footing stunning markets and appearing to finally

end policymakers’ tolerance for mounting price pressures, but a

range of risks are likely to keep any tightening gradually.

South Korean won weakened the most, falling 1%

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and was on track to mark the biggest weekly fall in 10 months

after the country’s current account balance became a deficit in

April for the first time in two years on a reduced trade surplus

and annual dividend payment to stock investors.

HIGHLIGHTS

** In Philippines, top index losers are Ayala Land Inc

down 5.36%; Bank of the Philippine Islands

down 5.32% ; SM Investments Corp down 4.87%

** Top losers on the Jakarta stock index include PT Trimuda

Nuansa Citra Tbk down 6.96%; Gaya Abadi Sempurna Tbk

PT down 6.91%

** Indonesian 10-year benchmark yields are up 4 basis points

at 7.228%​​

COUNTRY FX RIC FX FX YTD INDEX STOCKS STOCKS YTD %

DAILY % DAILY

% %

Japan +0.40 -13.98 -1.49 -3.36

China

India

Indones +0.07 -2.06 -1.35 7.66

ia

Malaysia -0.14 -5.32 -0.79 -4.45

a

Philipp +0.04 -3.68 -3.00 -7.96

ines

S.Korea

Singapo +0.18 -2.27 -0.91 1.81

re

Taiwan

Thailan

(Reporting by Indranil Sarkar in Bengaluru; Editing by Shailesh

Kubernetes)

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