Asia report: Stocks mixed after expected Fed rate hike

Stock markets in the Asia-Pacific region were mixed on Thursday, with Hong Kong leading the gains after the US Federal Reserve hiked interest rates by 25-basis points overnight.

The move was widely expected, although the Fed also hinted at a possible pause in rate hikes being on the horizon.

“Asian equities took their lead from Wall Street souring in risk sentiment, as all US benchmarks closed in the red, nursing losses as markets sought to make sense of a duelling narrative,” quipped Patrick Munnelly at TickMill Group.

“On the one hand, Fed chair [Jerome] Powell pretty much stuck to the script, raising rates by the expected 25-basis points while reducing near-term expectations for further imminent raises.

“Powell pushed back against the market pricing rate cuts, stating that this wasn't a baseline expectation for 2023 and that the FOMC was prepared to do more on rates if needed.”

Munnelly said the “fly in the ointment” and the catalyst for the sharp reversal in gains came from Treasury Secretary [Janet] Yellen's testimony, as she said that the Treasury was not considering insuring all uninsured bank deposits, “flip-flopping” on initial posturing that a backstop for deposits was being considered.

“This led to investors dumping risk exposure into the close of trading.”

Hong Kong leads gains, Toshiba set for takeover

In mainland China, the Shanghai Composite rose 0.64% to 3,286.65, and the Shenzhen Component increased 0.94% to 11,605.29.

The gains in Shanghai were led by China Satellite Communications, which jumped 10.02%, and GigaDevice Semiconductor Beijing, which was ahead 10.01%.

Hong Kong’s Hang Seng Index rose 2.34% to 20,049.64, with Orient Overseas International, Lenovo Group, Meituan, and Tencent Holdings posting gains of over 8%.

Chinese tech giant Tencent saw its shares surge 8.18%, after it reported better-than-expected quarterly revenue.

Elsewhere, in Japan the Nikkei 225 declined 0.17% to 27,419.61, and the broader Topix lost 0.29% to 1,957.32, with Dai-ichi Life, T&D Holdings, and Takeda Pharmaceutical declining by over 2%.

Toshiba Corporation saw its shares dip 0.21% as its board accepted a takeover offer of JPY 2trn from a coalition of 20 companies, which would take the firm private.

In South Korea, the Kospi increased 0.31% to 2,424.48, with Posco Chemical and Samsung Electronics seeing gains of over 1%.

The S&P/ASX 200 in Australia declined 0.67% to 6,968.60, with Polynovo down 12.32% and Sayona Mining declining 7.5%.

New Zealand’s S&P/NZX 50 managed gains of 0.07% to 11,594.94, with Eroad adding 4% and Serko seeing gains of 3.64%.

In currency markets, the yen strengthened 0.18% on the dollar to last trade at JPY 131.21, as the Aussie advanced 0.55% to AUD 1.4877, and the Kiwi was ahead 0.95% on the greenback to change hands at NZD 1.5920.

Oil prices were on the back foot, however, with Brent crude futures last down 0.48% on ICE at $76.32 per barrel, while the NYMEX quote for West Texas Intermediate decreased by 0.62% to $70.46.

Fed rate hike tops news, inflation slows in Singapore

At the top of the agenda was news that the Federal Reserve raised its benchmark interest rate by 25-basis points overnight, as widely expected, marking the ninth hike since March last year.

The central bank lifted its benchmark federal funds rate to a target range of 4.75% to 5% in its first decision since the recent banking sector liquidity fallout.

In its post-meeting statement, the Federal Open Market Committee (FOMC) said it would keep a close watch on data and the impact on monetary policy, with one further rate hike forecast this year under their projections.

During his press conference, Fed chair Jerome Powell said financial conditions had tightened more than the traditional benchmark indices were showing, citing concerns of a possible credit crunch amid the banking crisis.

In more local news, Singapore's consumer price index increased 6.3% year-on-year for February, slightly lower than January's 6.6% figure, according to fresh data from the Monetary Authority of Singapore (MAS).

The decline was put down to lower private transport inflation, while core inflation - excluding accommodation and private transport - remained steady at 5.5%.

MAS said it was expecting headline inflation to reach between 5.5% and 6.5% for 2023, with core inflation projected at a rate of between 3.5% to 4.5%.

Reporting by Josh White for Sharecast.com.