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EMERGING MARKETS-Taiwan stocks eye worst day since 1994 on COVID-19 risk; Asian markets dip

05/12/2021 00:48
EMERGING MARKETS-Taiwan stocks eye worst day since 1994 on COVID-19 risk; Asian markets dip

Graphic: World FX rates http://tmsnrt.rs/2egbfVh

Graphic: Foreign flows into Asian stocks https://tmsnrt.rs/3f2vwbA

Taiwan stocks down 8.6%, FX down 0.2% on possible virus curbs

Philippine stocks at lowest since Oct 2020

Philippine c.bank set to keep rates unchanged at record low

Asian FX, stocks pressured as U.S. inflation views build

By Rashmi Ashok

- Taiwan stocks slid more than 8% on Wednesday and were headed for their worst day in over 26 years as authorities mulled tighter restrictions to tackle a rise in domestic COVID-19 cases, while other Asian equities fell on concerns over higher inflation.

Equities in Taipei .TWII tumbled 8.6% and the Taiwan dollar TWD=TP weakened 0.2% as health authorities said they may raise the country's COVID-19 alert level in "coming days". nL1N2MZ05T

The possible restrictions, which would mean closure of non-essential businesses, came after a cluster of six new cases with no clear infection source was found on Tuesday, an unusual outbreak for the island that has kept a tight lid on community outbreaks.

The equity rout prompted the country's deputy finance minister to call for calm, saying the stock market's fundamentals were sound. nB9N2L201D

Taiwan stocks had rallied more than 100% from lows in March last year to end-April, buoyed by strong demand for the country's chips and electronics exports as the work-from-home shift boosted demand for home electronics.

Elsewhere, shares in Seoul .KS11 slipped 1.7%, while Thai equities .SETI were off nearly 1%. Regional currencies were also weaker, with export-focused units such as the won KRW=KFTC, the Singapore dollar SGD= and baht THB=TH losing most.

Despite various U.S. Federal Reserve officials reiterating a firmly dovish policy stance, investors worried that higher inflation from a spike in commodity prices could force the Fed to raise interest rates. U.S. inflation data due later in the day also added to nerves.

"Markets are calling the Fed's bluff, fearing that the Fed may need to hike rates more quickly and aggressively than expected. Today's U.S. CPI release will be a big focus for more clues," said Mitul Kotecha, chief EM Asia and Europe strategist at TD Securities.

"Should the Fed hint at an earlier taper, it would likely put pressure on Asian markets, with a likely firmer dollar weighing on Asian FX and higher U.S. yields pressurising Asian local currency bonds and equities," Kotecha said.

While Asian central banks are less sensitive to U.S. rates than previously, inflationary pressures in the region were starting to build, he added.

The Philippine market .PSI slipped 1.5% to hit its lowest since Oct. 30, 2020. The central bank is slated to announce its monetary policy decision soon, where it is expected to keep interest rates unchanged at a record low. nL1N2MY03P

Indonesian markets were closed for the Eid festival.


HIGHLIGHTS:

** Taiwan Cement Corp 1101.TW and Asia Cement Corp 1102.TW were among top losers on the Taiwan Stock Index, down over 5% each

** Malaysia's 10-year benchmark yield is up 0.5 basis points at 3.142%​,​ while the 3-year benchmark yield is up 0.1 basis points at 2.061%​​

** In the Philippines, top index losers are Megaworld Corp MEG.PS, down 4.03%, and SM Prime Holdings Inc SMPH.PS, down 3.53%



Asia stock indexes and currencies at 0420 GMT





COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

JPY=

-0.22

-5.15

.N225

-1.88

2.29

China

CNY=CFXS

-0.19

+1.36

.SSEC

-0.01

-0.91

India

INR=IN

+0.00

-0.37

.NSEI

-0.72

5.45

Malaysia

MYR=

-0.27

-2.59

.KLSE

0.26

-2.80

Philippines

PHP=

-0.01

+0.34

.PSI

-1.53

-12.74

S.Korea

KRW=KFTC

-0.44

-3.41

.KS11

-1.97

9.49

Singapore

SGD=

-0.27

-0.60

.STI

-0.63

9.87

Taiwan

TWD=TP

-0.17

+1.72

.TWII

-4.97

6.97

Thailand

THB=TH

-0.45

-4.07

.SETI

-1.09

7.76



(Reporting by Rashmi Ashok; editing by Richard Pullin)

(([email protected]; +918061822604;))