Asia report: Stocks mixed, RBNZ makes fifth consecutive rate hike

Stock markets were mixed in the Asia-Pacific region on Wednesday, as New Zealand’s central bank tacked another 50 basis points onto interest rates.

In Japan, the Nikkei 225 was down 0.26% at 26,677.80, as the yen weakened 0.18% against the dollar to trade at JPY 127.06.

It was a negative day for the benchmark’s major components, with automation specialist Fanuc down 0.41%, fashion firm Fast Retailing losing 0.47%, and technology conglomerate SoftBank Group 1.71% weaker.

The broader Topix index was 0.09% weaker by the end of trading in Tokyo, closing at 1,876.58.

On the mainland, the Shanghai Composite was up 1.19% at 3,107.46, and the smaller, technology-heavy Shenzhen Composite was 0.7% firmer at 11,143.18.

South Korea’s Kospi was 0.44% firmer at 2,617.22, while the Hang Seng Index in Hong Kong managed gains of 0.29% to 20,171.27.

Chinese technology stocks that are dual-listed on Wall Street were under particular pressure in the special administrative region, after an official from the US Securities and Exchange Commission told media overnight that “time is running out” in negotiations with China over audit rules.

“While there has certainly been progress in the discussions on audit inspections in China and Hong Kong, significant issues remain and time is quickly running out,” said the SEC’s director of international affairs, according to a transcript.

Alibaba Group was down 1.5% in Hong Kong, while Baidu lost 1.53% and JD.com was off 1.49%.

The blue-chip technology stocks were on the back foot in Seoul as well, with Samsung Electronics down 0.15% and SK Hynix losing 0.46%.

Oil prices were higher at the end of the Asian day, with Brent crude futures last up 1.32% on ICE at $115.06 per barrel, and West Texas Intermediate 1.54% firmer on NYMEX at $111.46.

In Australia, the S&P/ASX 200 was 0.37% higher at 7,155.20,

Across the Tasman Sea, New Zealand’s S&P/NZX 50 lost 0.66% to 11,173.37, as the Reserve Bank of New Zealand sated market expectations with its fifth consecutive interest rate hike.

The central bank added 50 basis points to its official cash rate (OCR), taking it to 2%.

“A larger and earlier increase in the [official cash rate] reduces the risk of inflation becoming persistent, while also providing more policy flexibility ahead in light of the highly uncertain global economic environment,” the RBNZ said in its statement.

The RBNZ became the first central bank of a G10 currency to raise interest rates in the wake of the Covid-19 pandemic in October.

It made three consecutive 25-basis point hikes between then and February, before accelerating to 50-basis point rises for its April and May decisions.

Analysts at TD Securities noted that the OCR forecasts for 2022 and 2023 had changed “materially” as the RBNZ projected ongoing increases over 2022 to 3.5% by year-end, and to hit a terminal rate of 4% by mid-2023.

“Despite this aggressive OCR profile, the Bank doesn't see a recession in its forecast horizon as it maintains household balance sheets are in relatively good shape,” TD Securities said.

“Governor [Adrian] Orr noted that the neutral OCR estimate is around 2% to 3%, but our takeaway from this discussion was that the Bank is resolute in tightening monetary conditions into fairly restrictive territory.

“The 4% terminal rate laid out today is almost 100 basis points higher than the upper limit of its neutral OCR range, which has not occurred since the end of 2008.”

The down under dollars were a mixed picture against the greenback, with the Aussie last 0.37% weaker at AUD 1.4121, while the Kiwi strengthened in the wake of the RBNZ decision, last advancing 0.12% to change hands at NZD 1.5460.

Reporting by Josh White at Sharecast.com.