(ATF) Hong Kong: Asian markets extended falls on inflation concerns but mainland China and Hong Kong stocks outperformed as recovery in the world’s second-largest economy continued to draw inflation trades.
Japan’s Nikkei 225 index dropped 1.61%, Australia’s S&P ASX 200 slipped 0.73% and the regional MSCI Asia Pacific index slipped 1.34%.
Copper and iron ore extended gains, eyeing new records as the commodities boom stayed intact.
“It is to be expected that there would be a jump in prices and supply shortages, in goods like chips and some commodities, as economies re-open and pent-up demand is unleashed by households, businesses and entire industries,” said Nigel Green, chief executive and founder of deVere Group.
“We’re at a point of major readjustment following an unprecedented economic shock and this is fuelling concerns that rising inflation will trigger central banks to tighten monetary policy which will hit asset prices.”
Steel stocks
But Hong Kong’s Hang Seng index advanced 0.78% and China’s CSI300 added 0.43%, because valuation perceptions and reflation trades boosted stock prices.
“Agriculture and steel stocks helped support the outperformance,” said Isaac Poole, CIO at Oreana Portfolio Advisory Service told Asia Times Financial. “This reflects strong demand momentum as the economic recovery is still strong and has been for some time. The valuation story is also important.
“We think China equities offer attractive returns looking forward but that has not been reflected in recent price action. We expect that provides further opportunities for investors to enter the market and that will support prices in the medium term.”
And yet ahead of the key US CPI data, US Treasuries were firm with the 10-year yield declining one basis point to 1.61%.
“The Fed will not be at all concerned about an upside surprise in April’s CPI,” said Alan Levenson, Chief U.S. Economist in the Fixed Income Division of T. Rowe Price who expects the 12-month CPI inflation rate to jump from 2.6% in March to 3.4% in April and to peak at 3.6% in May.
“More broadly, with inflation having run below 2% for an extended period, they would welcome some firming in the near term.”
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Asia Stocks
- Japan’s Nikkei 225 index dropped 1.61%
- Australia’s S&P ASX 200 slipped 0.73%
- Hong Kong’s Hang Seng index advanced 0.78%
- China’s CSI300 added 0.43%
- The MSCI Asia Pacific index slipped 1.34%
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