Asian Stocks Fall After Fed Decision

Asian Stocks Fall After Fed Decision

(AP) -- Stocks in parts of the Asia-Pacific, including Hong Kong, posted declines of some 1.5% Thursday, in part on interest-rate worries as the Federal Reserve reiterated plans to continue raising rates gradually as inflation firms.

But equities in Australia and New Zealand were noted outperformers, with their stock benchmarks up nearly 1% to continue recent gains. Rising commodities prices have been helping those markets get close to 2018 highs.

The U.S. central bank's latest statement caused knee-jerk reactions across asset classes Wednesday. While gold, the dollar and Treasury yields quickly recouped losses during U.S. trading, stocks didn't. They steadily fell into the close, finishing with declines approaching 1%.

That weakness largely carried across the Pacific, with Hong Kong's Hang Seng Index leading the decline with a 1.7% drop at midday. Tech and real-estate stocks were among those falling more than 2%.

Market talk about fresh U.S. sanctions against Chinese telelcom-equipment makers ZTE and Huawei Technologies as well as renewed weakness in the Hong Kong dollar sparked concerns about fund outflows, said Hayman Chiu, research director at Cinda International.

Meanwhile, China's central bank Wednesday night said that mainland investors wouldn't be able to use a preapproved quota program to buy assets abroad denominated in foreign currencies.

That stoked concerns "about the flow of funds from China into Hong Kong" as rumors circulated about Beijing putting fresh curbs on outward investments by insurers and asset managers, said Castor Pang, head of research at Core Pacific-Yamaichi International.

Daniel So, a strategist at China Merchants Bank, expects the city's stock market to remain weak thanks to fund-flow concerns, which have helped push the Hong Kong dollar back to the weak end of its trading band against the U.S. dollar.

He said the currency is set to come under added pressure as orders are being doled out for Friday's debut of Ping An Healthcare, after hundreds of billions of Hong Kong dollars were put up in hopes of getting into the HK$8.8 billion (US$1.1 billion) deal.

At the same time, pressure is building for local banks to hike their best lending rates, said Mr. So, adding volatility to rate-sensitive stocks like property developers. That sector saw declines of some 3% Thursday.

Norman Chan, the head of Hong Kong's de facto central bank, on Thursday warned of possible volatility in local interest rates and asset markets. Local liquidity is seen tightening gradually as capital continues to flow out of the city, he said, "providing a more conducive environment" for Hong Kong interest rates to increase.

With U.S. interest rates set to continue increasing steadily, that could pull some investment funds out of Asia, said Eugene Leow, a rates strategist at DBS. As such, there might be a need for more prudent monetary policies across the region, he said.

Elsewhere, Singapore's Straits Times Index pulled back 1.6% after hitting a fresh 10 1/2 -year high Wednesday. Indonesia's benchmark was down 2.3% Thursday at seven-month lows.

But rebounds were seen in China, with indexes there finishing morning trading down less than 0.5%. The startup-heavy ChiNext fell as much as 1.9% earlier.

The selling also came as Xiaomi, one of China's top smartphone makers, made its long-awaited filing for an initial public offering in Hong Kong. The company is set to go public this year.

Japan markets are closed for a four-day holiday weekend. Oil futures eased 0.2% in Asia after rallying Wednesday despite fresh 2018 highs for the dollar and bearish U.S. oil inventory data.