Asia report: Markets mixed as RBA makes 'outsized' rate hike

Stock markets closed in a mixed state in Asia on Tuesday, after Australia’s central bank hiked its key interest rate more than analysts were anticipating.

In Japan, the Nikkei 225 was up 0.1% at 27,943.95, as the yen weakened 0.62% against the dollar to last trade at JPY 132.70.

Tech investing giant SoftBank Group managed gains of 0.72%, while robotics specialist Fanuc was off 0.02% and Uniqlo owner Fast Retailing slipped 0.32%.

The broader Topix index was 0.41% firmer by the end of trading in Tokyo, settling at 1,947.03.

On the mainland, the Shanghai Composite was 0.17% stronger at 3,241.76, and the technology-centric Shenzhen Component was 0.02% weaker at 11,935.57.

South Korea’s Kospi was 1.66% lower at 2,626.34, while the Hang Seng Index in Hong Kong slipped 0.56% to 21,531.67.

The blue-chip technology stocks were on the back foot in Seoul, with Samsung Electronics down 1.95% and SK Hynix losing 2.8%.

Oil prices were lower as the region went to bed, with Brent crude futures last down 0.28% on ICE at $119.17 per barrel, and the NYMEX quote for West Texas Intermediate off 0.27% at $118.18.

In Australia, the S&P/ASX 200 slid 1.53% to 7,095.70, after the Reserve Bank of Australia lifted its cash rate by 50 basis points to 0.85%.

That was double the increase expected by market watchers, who had pencilled in an increase of 25 basis points.

Analysts at TD Securities noted that the move followed the central bank lifting the cash rate by 25 basis points at its May meeting, when consensus was for a 15-basis point hike.

“Although we stuck with our call made immediately following the RBA's May meeting for the RBA to hike 40 basis points in June, we did put the odds of a 50-basis point hike as a close second at 30% in our scenario analysis published yesterday,” TD Securities noted.

“Really the only reason we didn't call for a 50-basis point hike was our belief the RBA would prefer to move early on, getting the cash rate back to round quarter point settings, even though we did acknowledge the data supported a 50-basis point move.

“Quite clearly not having the cash rate at round quarter point settings is not a pressing concern for the Bank.”

TD Securities said that of more concern was the RBA’s urgency to bring inflation back to target, hence the outsized hike.

“The Bank now expects inflation to run higher compared to a month ago as a result of higher prices for electricity, gas and petrol.

“Indeed, households and businesses will face electricity price increases of around 10% year-on-year on average, while petrol prices are at a 10-year high, with the run-up in global oil prices likely adding to further increases ahead.”

The big four banks in the sunburnt country were on the back foot after the RBA’s decision, with Australia and New Zealand Banking Group down 1.49%, Commonwealth Bank of Australia off 2.6%, National Australia Bank sliding 3.25%, and Westpac Banking Corporation 2.13% weaker.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was 1.33% weaker at 11,265.70, led lower by subscription broadcaster Sky Network Television, which tumbled 7.2%.

The fall for the company - no relation to its Comcast-owned UK namesake - confirmed media speculation that it was eyeing up a large local acquisition in the radio broadcaster MediaWorks.

MediaWorks, which owns several national radio networks and an advertising division, had been struggling for direction since it sold its television assets to US giant Discovery Inc - now Warner Bros. Discovery - in late 2020.

A tie-up with Sky would see it return to visual broadcasting, given Sky operates the national free-to-air commercial network Prime alongside its subscription service.

The down under dollars were both weaker against the greenback, with the Aussie last off 0.07% at AUD 1.3911, and the Kiwi retreating 0.54% to NZD 1.5490.

Reporting by Josh White at Sharecast.com.