S.Korea, Taiwan shares shed 1%, lead Asia lower after Wall St tumble

3 minute read
Register now for FREE unlimited access to Reuters.com
  • Malaysia stocks heads for worst week since Aug 2020
  • BI surprises with hefty RRR hike on Thursday
  • Analysts note omission of dovish line in BNM statement
  • China's yuan set for second week of gains

BENGALURU, Jan 21 (Reuters) - South Korea and Taiwan stocks fell more than 1% each on Friday, leading falls across Asia's emerging markets, after U.S. stocks took a hit overnight, while fears that the Federal Reserve may tighten policy more aggressively kept a lid on currencies.

Shares in Taiwan (.TWII) closed 1.8% lower, while in South Korea (.KS11) they slid as far as 1.5% to their lowest in more than a year - as their tech sectors caught the chill from the Nasdaq (.IXIC), which has found itself in correction territory.

The U.S. dollar took a breather on Friday as investors picked up Treasuries, stalling a rise in yields, though markets have now priced in four interest rate hikes by the Fed this year, including one as soon as March.

Register now for FREE unlimited access to Reuters.com

The prospect has also placed Asia's central banks on watch, leaving policymakers with the difficult decisions of protecting economic recovery in their countries while maintaining stability and stemming potential outflows.

Emerging Asian "economies are not only disadvantaged in access to dollar funding under constraint, but are acutely vulnerable to capital outflows from a double whammy of rising long-end 'risk-free' UST (Treasury) yields and rising 'risk premium'," Mizuho said in a note.

On Thursday, central banks in Malaysia and Indonesia held their key policy rates steady ahead of the Fed's Jan. 25-26 meeting, where investors will be keenly watching out for hawkish signals. read more

The rupiah , a popular carry trade for investors, dipped 0.1%, while the ringgit firmed 0.1%.

Some analysts and economists detected a potential shift in Bank Negara Malaysia (BNM) from its policy statement.

"The central bank omitted a relatively dovish sentence from its statement, which we interpret as suggesting BNM no longer views policy easing as being more likely than tightening in the near term," analysts at Barclays said.

Stocks in Kuala Lumpur (.KLSE) dipped on Friday and were heading for their worst week since August 2020 with a more than 2% drop.

Bank Indonesia also surprised with 300 basis points of staggered hikes in the reserve requirement ratio for banks over the next eight months in one of its first concrete signs of monetary tightening. read more

After a week that saw data show weakening consumption in China, the central bank stepped up efforts to ease policy, with stocks (.SSEC) set to snap two straight weekly losses and eke out 0.1% gain. Despite policy easing, the yuan is set to book a second weekly gain.

Sources told Reuters that China will cut the interest rates on a key monetary policy tool by which financial institutions can obtain temporary liquidity from the central bank. read more

HIGHLIGHTS:

** Malaysian consumer prices in December rose slightly more than expected

** Malaysia's 3-year benchmark yield is down 1.6 basis points at 2.834%

** Indonesian 3-year benchmark yields are up 10.6 basis points at 4.429%​​

** Pegasus Asia, Tikehau Capital-backed SPAC, debuts in Singapore read more

Register now for FREE unlimited access to Reuters.com
Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Simon Cameron-Moore and Uttaresh.V

Our Standards: The Thomson Reuters Trust Principles.