BENGALURU: Emerging Asian equity markets fell and currencies weakened on Friday, as a broad risk-off mood prevailed among investors who worried about the health of US credit markets and trade tensions between the US and China.
MSCI’s gauge of Asian emerging market equities fell 1.5 percent, giving up gains from the previous two sessions. The index was on course to log a second consecutive weekly drop.
The MSCI index of emerging market currencies edged down 0.2 percent.
“Emerging concerns of asset quality in the US credit market led to a sharp sell-off in some regional banks in the US, resulting in slightly softer risk sentiment overall,” Michael Wan, a senior currency analyst at MUFG, said in a note.
Overnight, US bank Zions Bancorporation’s loan charge-off announcement amplified credit market fears in a sector shaken by recent bankruptcies of auto parts maker First Brands and subprime lender Tricolor.
Wan said the credit issues were not systemic or correlated, but the emergence of several cases had raised eyebrows.
In Asia, Singapore stocks fell 0.8 percent with DBS , Southeast Asia’s biggest bank, down 1.2 percent. Shares in Thailand and Malaysia fell 1.3 percent and 0.4 percent, respectively.
Shares in Taiwan closed down 1.3 percent. Chip giant TSMC dropped 2.4 percent despite posting a record quarterly profit and issuing an upbeat forecast.
South Korean stocks, which rose to a record high earlier in the session, gave up most of their gains and were last trading flat. The index still logged a 3.8 percent weekly gain.
Indonesian equities fell 2.2 percent. Data showed that foreign direct investment into Indonesia fell 8.9 percent in the third quarter, with the rate of decline sharpest since the first quarter of 2020.
The rupiah weakened 0.1 percent.
Other regional currencies also lost ground with the Philippine peso and the South Korean won falling 0.3 percent and 0.4 percent, respectively.
Adding to the market’s unease, China accused the US of stoking panic over its rare earth controls and said Treasury Secretary Scott Bessent had made “grossly distorted” remarks about a top Chinese trade negotiator, rejecting a White House call to roll back the curbs.
Parisha Saimbi, an FX strategist at BNP Paribas, expects trade in dollar-Asian currencies to remain choppy in the near-term with limited US data due to the government shutdown, and uncertainty over US-China tensions until a possible meeting later this month between US President Donald Trump and Chinese President Xi Jinping.
Saimbi expects the Thai baht and the Taiwan dollar to underperform in the region. The baht was last down 0.5 percent and the Taiwanese dollar was flat.
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