Hong Kong’s Hang Seng index drops 3% as Asia stocks fall

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SINGAPORE — Shares in Asia-Pacific largely declined in Friday trade after an overnight drop on Wall Street sent the Dow Jones Industrial Average to its worst day since 2020.

Hong Kong’s Hang Seng index led losses regionally as it fell 3.57% by the afternoon. In mainland China, the Shanghai Composite slipped 2.31% while the Shenzhen Component shed 2.326%.

“In Asia of course we’re very much influenced by what the US Fed does and the US economy but now we face the zero-Covid problem from China,” Richard Martin, a business consultant and managing director at IMA Asia, told CNBC’s ” Street Signs Asia” on Friday.

Data show China’s recent Covid lockdowns are hitting more than just Beijing and Shanghai, where the bulk of new infections have been found.

“A lot of the components and materials come out of China, so in addition to weak demand from China, we’re going to have a shortage of components from China which on the supply side into the markets across Asia will stop factories running,” Martin said.

With no obvious news flow to explain the sharp reversal, it seems instead that the relief of Powell indicating 75bp moves were likely a step too far gave way to a renewed focus on high inflation and a challenging growth outlook.

Taylor Nugent

economist, National Australia Bank

Technology stocks in the region sold off, following the tech-heavy Nasdaq Composite’s nearly 5% drop overnight stateside.

Shares of Tencent declined 4.53% while Alibaba fell 6.46% and Meituan slipped 5.22%. Hong Kong’s Hang Seng Tech index was 5.03% lower. The broader risk-off sentiment also extended to electric vehicle stocks, with Xpeng plunging 10.24% while Nio shed 11.03 %.

In Japan, shares of conglomerate SoftBank Group dropped 1.78%. South Korea’s Kakao slipped 4.83% while industry heavyweight Samsung Electronics declined nearly 2%.

Other Asia-Pacific markets mostly dip

South Korea’s Kospi dropped 1.17%. The S&P/ASX 200 in Australia shed 2.28% while Singapore’s Straits Times index slipped 1.29%.

Japanese stocks bucked the overall trend regionally as they returned to trade on Friday after being closed for holidays much of this week. The Nikkei 225 gained 0.84% ​​while the Topix index traded 1.01% higher.

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MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.58%.

Overnight on Wall Street, the Dow Jones Industrial Average plunged 1,063.09 points — or 3.12% — to 32,997.97. The S&P 500 fell 3.56% to 4,146.87.

Thursday’s moves on Wall Street were a sharp reversal from a Wednesday rally after the US Federal Reserve increased its benchmark interest rate by half a percentage point, in line with market expectations and also the biggest hike in two decades.

Fed Chairman Powell also indicated raising rates by 75 basis points at a time is “not something the committee is actively considering.”

“With no obvious news flow to explain the sharp reversal, it seems instead that the relief of Powell indicating 75bp moves were likely a step too far gave way to a renewed focus on high inflation and a challenging growth outlook,” Taylor Nugent, an economist at National Australia Bank, wrote in a Friday note.

Currencies and oil

The US dollar index, which tracks the greenback against a basket of its peers, was at 103.669 after a recent jump from below 103.

The Japanese yen traded at 130.57 per dollar, weaker as compared to levels below 130 seen against the greenback earlier in the week. The Australian dollar was at $0.7107 after yesterday’s decline from levels above $0.721.

Oil prices were higher in the afternoon of Asia trading hours, with international benchmark Brent crude futures up 0.59% to $111.55 per barrel. US crude futures also gained 0.61% to $108.92 per barrel.

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