Hang Seng and Nikkei Fall as Asian Stocks, Currencies Slide

Stocks fell across most of Asia on Friday, as markets turned risk-averse ahead of more insights on US monetary policy from Fed chair Jay Powell later in the day at Jackson Hole.

Positive results from chipmaker Nvidia offered some support to regional tech stocks this week, but they were largely offset by fears of more hawkish signals from the Federal Reserve.

US indexes tumbled overnight amid pressure from high yields and as data showed that the jobs market remained strong, positing a hawkish outlook for interest rates.

Tech-heavy Asian bourses were among the worst performers for the day, with Hong Kong’s Hang Seng Index and South Korea’s KOSPI down 2% and 0.7%, respectively.

ALSO SEE: Raimondo Heading to China for Talks as Bilateral Trade Plunges

Tech stocks had logged strong gains after Nvidia flagged more demand for AI development this year, but the prospect of higher interest rates and worsening economic conditions largely offset this optimism.

Memory chipmakers Samsung Electronics and SK Hynix, which both saw strong gains this week, sank by 1.5% to 3%, while Baidu, Alibaba and Tencent Holdings were down by between 0.7% and 2%.

TSMC, Asia’s biggest chipmaker, slumped nearly 3%, while the Taiwan Weighted index fell 1.1%.

Japanese stocks slump on tech rout, China jitters

Japan’s Nikkei 225 slumped by over 2%, while the TOPIX lost 0.9% amid the steep tech losses, as well as concerns over worsening trade ties with China.

Chip equipment maker Advantest Corp slid 10% and was by far the worst performer on the Nikkei 225. The stock reversed all of its gains made earlier in the week.

China banned the import of seafood from the country, citing concerns over radioactive contamination as Japan began releasing contaminated water from the Fukushima plant into the Pacific Ocean.

China is Japan’s top seafood export market, although marine exports make up less than 1% of Japan’s total exports.

Powell, central bank signals in focus

Asian stocks were also rattled by US Treasury yields trending at multi-decade highs, plus analysts warned that Powell could flag an era of higher baseline interest rates, which bodes poorly for risk-driven markets as monetary conditions tighten.

This notion weighed on broader Asian markets, with Australia’s ASX 200 down nearly 1%.

Beyond Powell, central bankers from Japan and Europe are also set to speak at Jackson Hole, potentially offering up more cues on policy.

China’s bourses were also in the red but authorities are planning to cut the stamp duty on stock trading by as much as 50%, sources said – to revitalise the country’s struggling stock market.

Authorities also stepped up their defence of the yuan, with the People’s Bank of China ordering local banks to restrict offshore bond purchases in a bid to limit the supply of yuan offshore.

Fed chair Jerome Powell is due to deliver his keynote address to the annual central banking symposium in Jackson Hole at 1405 GMT. Trepidation about the speech largely explains why renewed buzz about artificial intelligence after this week’s blowout Nvidia results ended up being such as a damp squib on Thursday.

And given increasingly contrasting fortunes of economies on either side of the Atlantic, Powell’s words are expected to contain a different message to the one from European Central Bank President Christine Lagarde later in the day at 1900 GMT.

That much was underlined by August business surveys this week showing activity contracting in the euro zone but still expanding stateside. Another survey miss from Germany’s Ifo on Friday reinforced the picture.

The euro/dollar exchange rate plunged to its lowest level in more than two months on Friday as a result – off a whopping 4.5% from the peaks of July as the US long-term bond yields resumed their upward march through August.

Asian currencies weaken

Meanwhile, emerging Asian currencies weakened on Friday, led by Thailand’s baht and the Indonesian rupiah, as the dollar firmed ahead of Powell’s speech.

The rupiah eased 0.4%, a day after the country’s central bank left interest rates unchanged, as expected, while drawing up plans to attract foreign portfolio investments that would help stabilise the currency.

Bank Indonesia (BI) plans to issue new rupiah-denominated securities, using its holdings of government bonds as the underlying asset, Governor Perry Warjiyo said.

The rupiah has been the region’s best performing currency this year. However, it has come under pressure recently along with Indonesian bonds due to China’s economic malaise and a widening yield gap with US Treasuries, which have resulted in a deterioration of Indonesia’s external balances.

Indonesia’s current account swung into deficit for the first time in two years in the second quarter due to falling commodity prices and weak global growth, and the central bank expects the deficit will be higher next year.

The baht weakened 0.5%, but was still set for its first weekly gain in four weeks. After months of political uncertainty following a May general election, the baht has drawn some support from the formation of a new government by the Pheu Thai-led coalition, and appointment of Srettha Thavisin as prime minister.

The baht’s weakness on Friday was partly due to data showing Thai exports shrank for a 10th consecutive month in July, and at a far bigger rate than expected. The commerce ministry said it would be difficult to meet the full-year export growth target.

Meanwhile, the US dollar rose to a more than two-month peak and was on course for its sixth straight weekly gain.

The South Korean won declined 0.2%. Malaysia’s ringgit was flat after weakening 0.2% earlier in the session. It was set for its third consecutive weekly loss.

Data showed that Malaysia’s consumer price index rose 2% from a year earlier in July, the lowest inflation print in two years.

Bucking the trend, the Philippine peso added 0.3%.

Equities in the region were also lower, with those in Jakarta, Manila and Seoul falling between 0.2% and 1.1%.