Asia report: Japan leads equities lower as China holds interest rates

by | Jun 21, 2021

Stocks closed in a mixed state in Asia on Monday, led by falls on the Japanese bourse, as China’s central bank held interest rates steady in its latest decision.
In Japan, the Nikkei 225 was down 3.29% at 28,010.93, as the yen strengthened 0.08% against the dollar to last trade at JPY 110.12.

Of the major components on the benchmark index, automation specialist Fanuc was down 5.62%, fashion firm Fast Retailing lost 4.35%, and technology conglomerate SoftBank Group was off 3.51%.

Carmakers were on the back foot across the board, with Honda Motor down 3.93%, Nissan Motor losing 4.07%, and Toyota Motor slipping 1.98%.

The broader Topix index was 2.42% weaker by the end of trading in Tokyo, closing at 1,899.45.

“Asian markets slumped heavily as investors continued to react to last week’s US Federal Reserve meeting, which has curdled sentiment by raising the prospect of earlier-than-expected rate rises,” said AJ Bell investment director Russ Mould.

“Having scaled the highest peaks in recent months, Japan’s Nikkei index notched up a chunky fall of more than 3% on Monday.

“As an export-driven economy, Japan is particularly sensitive to what is happening beyond its waters, while domestically a sluggish vaccine rollout and uncertainty over Tokyo’s Olympics aren’t doing much to help matters.”

On the mainland, the Shanghai Composite managed gains of 0.12% to 3,529.18, and the smaller, technology-heavy Shenzhen Composite advanced 0.74% to 2,396.20.

The People’s Bank of China announced earlier in the session that it was holding the one-year loan prime rate at 3.85%, and the five-year rate at 4.65%.

That sated the expectations of market participants, who had predicted no changes in a poll conducted by Reuters.

“The rate is unlikely to change unless there is a shift in the PBoC’s interest rate corridor,” said Pantheon Macroeconomics chief Asia economist Freya Beamish.

“For now, the Bank seems content with its stance, replacing CNY 200bn of maturing MLF funds this month, and keeping its open market operations neutral, with respect to interbank rates.”

South Korea’s Kospi was down 0.83% to 3,240.79, while the Hang Seng Index in Hong Kong was 1.08% lower at 28,499.00.

The blue-chip technology stocks were weaker in Seoul, with Samsung Electronics down 0.75% and SK Hynix losing 2.01%.

Oil prices were higher at the end of the Asian day, with Brent crude last up 0.53% at $73.90 per barrel, and West Texas Intermediate rising 0.36% at $71.90.

In Australia, the S&P/ASX 200 was down 1.81% at 7,235.30, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was off 0.42% at 12,499.36.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.31% at AUD 1.3320, and the Kiwi advancing 0.48% at NZD 1.4346.

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