Asia report: Markets lower as Hong Kong, Beijing move interest rates higher

Markets in Asia finished lower on Thursday, as both the Hong Kong Monetary Authority and the People’s Bank of China raised rates in the wake of the latest rate increase from the US Federal Reserve.

In Japan, the Nikkei 225 was down 0.28% at 22,694.45, as the yen weakened 0.14% against the dollar to last trade at JPY 112.7.

Blue-chip technology stocks, banks and carmakers mostly finished lower in Tokyo, while energy plays were higher.

Panasonic and Toyota confirmed they had struck an agreement to develop new automotive battery technology, as the traditionally more petrol-focussed Japanese car industry was seen to be coming around to the idea of electric vehicles.

Panasonic shares were up 2.35% and Toyota advanced 0.23%.

On the mainland, the Shanghai Composite lost 0.29% at 3,293.58 and the smaller, technology-heavy Shenzhen Composite fell just 0.04% to 1,915.01.

The People’s Bank of China made a move to increase interest rates on Thursday, tacking five basis points onto both the reverse repo and the medium-term lending facility rates.

Financial stocks were on the back foot in Shanghai as a result.

It was also a big day for data in China, with fixed-asset investment growth coming in as expected at 7.2%, while industrial output beat forecasts at 6.1%, compared to the 6% predicted in a Reuters poll.

Retail sales in the People’s Republic were up 10.2% year-on-year in November, which was in line with expectations.

South Korea’s Kospi was off 0.45% at 2,469.48, while the Hang Seng Index in Hong Kong was 0.19% softer at 29,166.38.

In Seoul, the so-called ‘THAAD stocks’, which have particular exposure to Sino-Korean political relations and the development of the THAAD anti-missile system in Korea, gave up some of their gains and finished mixed.

The movements came as South Korean president Moon Jae-in continued his four-day visit to China, along with executives from major companies on the peninsula.

Of the ‘THAAD stocks’, LG Household was up 1.61% and Lotte Shopping fell 0.5%.

Blue-chip technology names were down too, as were carmakers, with Hyundai Motor off 0.66% and Samsung Electronics slipping 0.51%.

In Hong Kong, the special administrative region’s central bank announced the raising of its base rate by 25 basis points to 1.75%, which matched the decision released late on Wednesday by the Federal Reserve in the US.

Oil prices fell, with Brent crude last down 0.6% at $62.07 per barrel and West Texas Intermediate off 0.41% at $56.37.

Much of the market’s attention was on reacting to the Fed’s widely expected move, after the central bank shifted its target rate higher to between 1.25% and 1.5% late on Wednesday in the US.

Additionally, the Federal Open Market Committee upped its GDP forecast to 2.5% from 2.1%, and lifted its inflation forecast to 1.7% from 1.6%.

“The Fed has hiked three times this year despite tame wage and inflation numbers,” noted DBS Bank chief economist Tamur Baig.

“The central bank can therefore be expected to do the same next year, especially if the economy continues to grow robustly and the financial sector remains stable.”

In Australia, the S&P/ASX 200 fell 0.17% to settle at 6,011.30, with the major miners finishing mixed, while the utilities and real estate investment subindices lost ground.

BHP eked out gains of 0.04% in Sydney.

On the retail front, department store operator Myer said its first half result for the 2018 financial year were looking to be “materially below” the prior year comparator.

The chain put the decline down to lower foot traffic and discounting across the industry.

Shares in Myer were down 9.66% by end-of-play.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was up 0.5% to 8,323.75, led higher by Scales Corporation, which was ahead 4.1%.

The move came after the horticulture and food ingredients conglomerate said last week that it was expecting full-year earnings to be at the upper end of guidance for the current financial year, along with a rise in earnings in 2018.

It was a mixed picture for the down under dollars, with the Aussie strengthening 0.36% to last trade at AUD 1.3047 against the greenback, while the Kiwi weakened 0.34% to NZD 1.4285.