Asian FX, stocks slide as virus woes hurt risk sentiment

BENGALURU (July 20): Equities in South Korea, India, and Thailand declined on Tuesday, while most Asian currencies traded flat to lower, as the rapid spread of novel coronavirus at home and abroad intensified fears about a slowdown in global economic growth.

In holiday-thinned trade where Philippines, Indonesia, Malaysia and Singapore bourses were shut, Seoul, Thailand and Taiwan’s stocks dropped between 0.4% and 1.6%.

Investors bought safe-haven assets, with US Treasury yields tumbling to five-month lows, as a Delta variant-fuelled rise in Covid-19 cases in countries with high vaccination rates like the United States and England stoked worries over economic growth.

“The drop in real yields arguably indicate the fixed income market’s acute growth concerns and those concerns may finally have started to hit the equity market,” said Alvin T Tan, head of Asia FX strategy at RBC Capital Markets.

“There is a good chance the risk-off moves could extend in the thin summer market.”

Denting sentiment further, China — the region’s growth engine — reported its highest daily tally of Covid-19 cases since January after a second cluster of infections involving the highly contagious Delta variant emerged.

Shanghai shares eased 0.3%, but the yuan nudged up 0.1% after the People’s Bank of China stood pat on benchmark lending rate despite growing expectations for a cut.

The South Korean won and the Singapore dollar weakened 0.2% each, while the Thai baht was little changed.

All of the three countries are seeing a spike in cases amid curbs that have curtailed economic activity. Thailand is among the worst affected, as authorities there warned daily infections could reach the 30,000-mark amid a slow vaccination rate.

Indian shares slid 1% to a one-month low after some blue-chip companies posted mixed results.

Highlights

  • Developing Asia’s economic growth in 2021 will be slightly lower than previously projected — Asian Development Bank
  • Top losers on Thailand’s SETI include Jasmine Telecom Systems PCL down 12.% and Central Plaza Hotel PCL down 8% 
  • Indonesian rupiah and the Malaysian ringgit were not trading due to a holiday in their respective countries

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