Asia: Fed's uncertainty drags markets lower across the region

Asian equity markets ended the week on a downbeat note, as investors in the region remained jittery over what looks a probable December rate hike by the US Federal Reserve.

Thursday’s comments from a number of Fed officials, including chairwoman Janet Yellen and regional Fed presidents William Dudley, Charles Evans and Jeffrey Lacker, did little to shed light over the US central bank’s intention, leading to further uncertainty in markets across the Asia Pacific region.

The Shanghai Composite Index declined 1.43%, while Hong Kong’s Hang Seng Index fell 2.15% as concerns over the Fed’s decision offset positive gross domestic product data (GDP)

Official figures released on Friday showed Hong Kong’s GDP rose 0.9% quarter-on-quarter in the three months to September, while the pace of expansion on a year-on-year basis declined from 2.9% in the previous quarter to 2.3%.

However, the breakdown was somewhat more disappointing than the headline figures, as exports and investment and inventories were the only components to register an improvement from the second quarter.

“Weakness in global demand has not undermined growth in this trading centre as much as many would have expected,” said Mark Williams, chief Asia economist at Capital Economics.

“The emerging world has had a long time to prepare for the start of the Fed’s tightening cycle, but Hong Kong is uniquely exposed.

“Domestic interest rates are sure to rise and put significant stress on the property market for the first time since the post-2009 surge in prices got underway.”

Japan’s Nikkei Stock Average lost 0.51%, while Australia’s S&P/ASX 200 and South Korea’s Kospi slid 1.45% and 1.01% respectively, with the former’s decline this week offsetting a large percentage of its 6% rally between late September and late October.

Australia’s benchmark has fallen 3.6% since the start of November, dragged lower by the energy sector, which was again under the cosh on Friday, as oil prices slumped overnight.

On the currencies front, the Japanese yen slid 0.07% against the dollar, while the Australian dollar gained 0.05% against its US counterpart.

“After a day of multiple speeches and remarks from Federal Reserve policy makers, volatility in the FX markets was not as high as one might have expected, but risk aversion in the equity markets set in once again,” said Simon Smith, chief economist at FX Pro.