Asian Stocks: Asian stocks fall on valuation concerns, high U.S. yields
MSCI’s broadest index of Asia-Pacific shares outside Japan deepened losses with a near 2 per cent drop, while high-flying technology stocks in South Korea and Taiwan were among the region’s biggest decliners.
Sentiment in Philippines took a further hit, with stocks down nearly 1 per cent, as Covid-19 restrictions were extended in the capital earlier this week.
Elsewhere, U.S. Federal Reserve Chairman Jerome Powell soothed inflation concerns and reiterated an accommodative policy stance in an overnight speech, but did not address potential risks from rising bond yields.
“I think Chair Powell did as much as he could in terms of dampening down on expectations of tapering, without introducing new steps. The reality is that the market is nervous regardless,” said Mitul Kotecha, a strategist at TD Securities. Higher U.S. real yields and “froth” in some sectors were fuelling concerns of a deeper correction, he said.
So far this year, the Asia-ex Japan index has risen more than 7 per cent, building on a 20 per cent surge in 2020.
Asian bond yields inched down in line with U.S. yields after Powell’s comments but hovered near multi-month highs scaled recently.
“The Asian local currency bond market picture looks precarious at present, largely due to the sharp back up in U.S. Treasury yields. This is likely to weigh on foreign bond portfolio inflows in the weeks ahead,” Kotecha noted.
Bucking the trend, Singapore stocks rose 1.2 per cent after Oversea-Chinese Banking Corp reported a smaller-than-expected decline in quarterly profit, boosting local bank shares and sending OCBC’s stock 2.3 per cent higher.
In the Philippines, food and beverage maker Universal Robina fell 2 per cent, while restaurant operator Jollibee Foods Corp shed 2.9 per cent.
