SINGAPORE – Shares in Asia-Pacific struggled for direction in Friday trade, following sharp declines on Wall Street as investors weigh the possibility of aggressive monetary policy tightening leading to a recession.
The Nikkei 225 in Japan fell 1.64% in afternoon trade as shares of conglomerate SoftBank Group plunged close to 4% while the Topix index shed 1.54%. South Korea’s Kospi declined 0.53%.
In Hong Kong, the Hang Seng index recovered from earlier losses to rise 0.78% by the afternoon, with shares of life insurer AIA climbing more than 2%. Mainland China stocks were mixed, with the Shanghai Composite mildly lower while the Shenzhen Component gained 0.129%.
Over in Australia, the S & P / ASX 200 slipped 1.86%.
MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.43%.
“We still maintain our overweight view on equities versus bonds,” said Suresh Tantia, senior investment strategist at the APAC chief investment office of Credit Suisse.
“You can not rule out further downside because right now markets are very volatile, they are trading on news flow and based on the expectations of Fed but at current levels, it does not really make sense to sell. I think once the expectations of Fed rate hikes stabilize, then we should start to see a recovery in the equity market, “he said.
Shares on Wall Street fell sharply overnight, with the S&P 500 dropping 3.25% to 3,666.77. The Dow Jones Industrial Average shed 741.46 points, or 2.42%, to 29,927.07. The Nasdaq Composite lagged, falling 4.08% to 10,646.10.
Bank of Japan rate decision
The Bank of Japan on Friday said it would maintain its ultra-easy monetary policy.
Following that decision, the Japanese yen weakened more than 1% to 134.02 per dollar, though it was still stronger as compared with levels above 135 seen against the greenback earlier this week.
The Japanese central bank’s decision stands in sharp contrast to that of its global peers. Earlier this week, the US Federal Reserve, Bank of England and Swiss National Bank all raised their benchmark rate hikes.
“The contradiction is: Whereas the markets are saying that central banks have to do more to control inflation, the more the central banks do to control inflation, the more they shock the markets. Now you’re in that state at the moment,” David Roche, president and global strategist at Independent Strategy, told CNBC’s “Squawk Box Asia” on Friday.
Beyond concerns about tighter monetary conditions, other factors such as the disruptions caused by China’s zero-covid policy and the ongoing Russia-Ukraine war have also further contributed to an uncertain economic outlook.
Currencies and oil
The US dollar index, which tracks the greenback against a basket of its peers, was at 104,275 after a recent drop from levels above 105.
The Australian dollar changed hands at $ 0.7019, off an earlier high of $ 0.7053.
Oil prices were lower in the morning of Asia trading hours, with international benchmark Brent crude futures down 0.58% to $ 119.11 per barrel. US crude futures slipped 0.73% to $ 116.73 per barrel.