BENGALURU: Asian emerging market equities tanked for a fifth straight session on Wednesday as US President Donald Trump’s “reciprocal” tariffs on dozens of countries, including the eye-watering 104% levies on Chinese goods, went into effect.
Indonesia’s rupiah hit a fresh lifetime low, while yields on the 10-year benchmark bonds crept higher towards a mid-January high as traders worried about the fallout of escalating trade tensions and domestic economic concerns.
Trump’s punishing tariffs, including the massive levies on China, deepened the carnage in financial markets globally and caused a sell-off in the 10-year US Treasury, considered the globe’s benchmark safe-haven anchor. China has vowed to fight what it views as blackmail.
“A major trade war between the US and China will not be the best piece of news for markets in the short term,” said Vasu Menon, managing director, Investment Strategy at OCBC.
An MSCI gauge of Asian emerging market equities plunged 2.2% to its lowest in a year and fell deeper into oversold territory. A subset of equities in ASEAN countries also hit a 17-month low.
Most Southeast Asian equity indexes were also oversold and were either creeping towards or had confirmed a bear market. Many of these countries count China as their biggest trading partner and have also been hit with hefty tariffs.
In Singapore, the benchmark index fell for the eighth straight session and has lost about 15% since its all-time high less than two weeks ago. It dropped more than 2% on the day to hit a seven-month low. It dipped into oversold territory this week for the first time since early August last year.
Malaysia’s stocks hit their weakest point in 18 months. South Korea’s KOSPI
fell 0.5%, while Taiwan’s benchmark index shed 5% to hit the lowest since mid-January last year. Thai stocks dipped about 1%.
Currencies were broadly under pressure on the day, with a weakening Chinese yuan - trading at 19-month lows - pressuring units of countries with close trade ties to China.
Indonesia’s rupiah plunged to 16,970 a dollar in the morning session but largely recovered the day’s losses as the central bank intervened. Thailand’s baht slipped to a four-month low, while the Malaysian ringgit hovered around its weakest since early February.
“The more bearish China growth outlook will put Asian currencies with higher China exposure under pressure, and some Asian countries may compete to depreciate their currencies against RMB (yuan),” said Ken Cheung Kin Tai, chief Asian FX strategist at Mizuho Bank.
India’s Nifty 50 declined while the rupee hit a three-week low after the central bank lowered its key repo rate for a second consecutive time.
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