Asian markets fell on Friday as a broadly positive week drew to a close with investors pricing in the likelihood that US Federal Reserve officials would start withdrawing the vast financial support put in place at the start of the COVID-19 pandemic.
The fast-spreading Delta variant of SARS-CoV-2, which is forcing governments to introduce containment measures, and the Chinese government’s campaign to tighten its grip on the world’s No. 2 economy were also playing on sentiment.
Data on Thursday showed that US producer prices rose more than twice as much as forecast month-on-month last month, while the annual rate hit a record, reinforcing traders’ belief that the blockbuster economic recovery is putting huge pressure on inflation.
The figures ramped up expectations that the Fed, in a bid to prevent overheating, would start reducing its colossal bond-buying program earlier than it had thought.
“Global investors are assessing the implications of the spread of the Delta virus, the possible tapering by the Fed, and China’s clampdown,” Federated Hermes head of global equities Geir Lode said. “With equity markets almost doubling since the start of the pandemic and a bull market lasting over a decade, investors are questioning how far the bull market can rally.”
“We therefore think that the inflation risk is on the upside and that the Fed will start tapering at the end of the year,” he added.
However, while the ultra-cheap borrowing that has been key to propelling the pandemic rally for more than a year looks likely to end, traders remain broadly upbeat, with the Fed — and other central banks — likely to take time withdrawing the support.
Traders will be keeping a hawk-like eye on Fed Chairman Jerome Powell’s speech at this month’s gathering of central bank and finance leaders in Jackson Hole, Wyoming, hoping for a hint at when he will act.
Wall Street’s three main indices ended at record highs again Thursday, but Asia struggled to follow suit.
In Taipei, the TAIEX closed down 237.83 points, or 1.38 percent, at 16,982.11. Turnover totaled NT$378.896 billion (US$13.6 billion). It dropped 3.1 percent from a week earlier.
Seoul’s KOSPI declined 1.16 percent to 3,171.29, down 3.03 percent week-on-week.
In Hong Kong, the Hang Seng dropped 0.48 percent to 26,391.62, but was up 0.81 percent from a week earlier.
The Shanghai Composite Index shrank 0.24 percent to 3,516.30, finishing the week up 1.68 percent.
In Japan, the Nikkei 225 lost 0.14 percent to 27,977.15, rising 0.56 percent from a week earlier, while the broader TOPIX gained 0.15 percent to 1,956.39, posting a weekly increase of 1.40 percent.
Bangkok and Jakarta all fell, with Manila’s PSEi Index losing 3.61 percent on fears over a fresh COVID-19 surge in the Philippine capital.
Sydney and Wellington rose, while Mumbai hit a new record, with the SENSEX breaking past 55,000 points for the first time. It rose 1.08 percent to 55,437.29, up 2.14 percent on the week.
Additional reporting by staff writer, with CNA
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