Asia report: Markets mixed as China holds rates, lira in focus

Markets in Asia finished in a mixed state on Monday, as China’s central bank stood pat on interest rates, while investors kept an eye on developments in Turkey after a serious weakening in the lira over the weekend.

In Japan, the Nikkei 225 was down 2.07% at 29,174.15, as the yen strengthened 0.15% against the dollar to last trade at JPY 108.74.

Of the major components on the benchmark index, automation specialist Fanuc was down 3.16%, fashion firm Fast Retailing was off 4.54%, and technology conglomerate SoftBank Group lost 1.05%.

Chipmaker Renesas Electronics plummeted 4.89%, after a fire damaged one of its manufacturing facilities on Friday.

It said over the weekend that it would take at least a month for production there to restart, causing concern for a chip market already facing a global shortage.

Carmakers were on the back foot as a result as they were already being affected by the shortage, with Honda down 3.63%, Nissan off 3.7%, and Toyota 3.26% weaker.

The broader Topix index was off 1.09% by the end of trading in Tokyo, settling at 1,990.18.

On the mainland, the Shanghai Composite was ahead 1.14% at 3,443.44, and the smaller, technology-heavy Shenzhen Composite rose 1.27% to 2,222.72.

The People’s Bank of China kept its interest rates on hold as expected on Monday, with the one-year loan prime rate remaining at 3.85%, and the five-year rate at 4.65%.

South Korea’s Kospi slipped 0.13% to close at 3,035.46, while the Hang Seng Index in Hong Kong was 0.36% weaker at 28,885.34.

Seoul’s blue-chip technology stocks were mixed, with Samsung Electronics eking out gains of 0.12%, while SK Hynix closed flat.

The Turkish lira was in focus on Monday, after the currency weakened against the dollar to trade higher than TRY 8.17 earlier in the session.

That came after Turkey’s president, Recep Tayyip Erdogan, swiftly replaced the governor of the Central Bank of the Republic of Turkey days after a sharp interest rate rise.

Naci Agbal, who took up the post less than five months ago, had taken an aggressive policy stance by raising the benchmark rate by 875 basis points to 19% in his term, which was welcomed by markets.

His sudden removal on Saturday morning came after a higher-than-expected 200 basis point rise in the rate on Thursday, in a bid to stave off weakness in the lira and inflation nearing 16%.

Erdogan replaced Agbal with a former MP from his ruling AKP party, Sahap Kavcioglu - an ex-banker and vocal critic of his predecessor’s policy position.

The lira was recently trading 9.47% weaker against the dollar, changing hands at TRY 7.9021.

“The sacking of Naci Agbal raises fears about the path economic and monetary policy, with market participants prepared for rates to be cut and for the re-emergence of ‘Erdonomics’,” said Markets.com chief market analyst Neil Wilson.

“It raises all sorts of questions about the government’s ability and competence to handle the economic issues facing Turkey.

“Agbal’s efforts to raise rates to counter inflation, which is still running at above 15%, helped to boost confidence more generally in the country’s assets.”

Oil prices were higher at the end of the Asian day, with Brent crude last up 0.26% at $64.70 per barrel, and West Texas Intermediate ahead 0.29% at $61.62.

In Australia, the S&P/ASX 200 managed gains of 0.66% to 6,752.50, while across the Tasman Sea, New Zealand’s S&P/NZX 50 lost 1.49% to 12,329.09.

Both of the down under dollars were stronger against the greenback, with the Aussie last ahead 0.25% at AUD 1.2941, and the Kiwi advancing 0.31% to NZD 1.3955.