Singapore, South Korea announces monetary tightening

SINGAPORE – Shares in the Asia-Pacific region were mixed in trading on Thursday, with mainland Chinese stocks among the biggest winners regionally amid hopes of political support from the authorities. Singapore and South Korea also announced monetary tightening.

At Thursday’s market close in mainland China, the Shanghai composite rose 1.22% to 3,225.64, while the Shenzhen component rose 1.266% to around 11,714.62.

The Chinese government announced on Wednesday that cuts in the reserve requirement rate will be used “at an appropriate time to increase banks’ credit capacity,” citing details from a cabinet meeting chaired by Prime Minister Li Keqiang.

That development comes as China in recent weeks has been battling its most serious Covid outbreak on the mainland since the initial phase of the pandemic in early 2020.

“Whether it’s looking at big data blips of the number of ships waiting offshore in Shanghai or just talking to my colleagues in Shanghai, there will be significant disruption to the Chinese economy from the current shutdowns that we see from Covid, “David Wong, senior investment strategist for shares at AllianceBernstein, told CNBC’s” Street Signs Asia “on Thursday.

Although the problem of inflation is not as serious as it is in many parts of the developed world, it is understandable that both central banks [of South Korea and Singapore] trying to make sure they act preventively.

Clara Cheong

Global Marketing Strategist, JPMorgan Asset Management

“I think what we are seeing now in terms of policy easing may partially offset, but may not completely offset, some of the negative fundamental effects,” Wong said.

In Hong Kong, the Hang Seng Index also rose 0.57% from its last trading hour. Shares of CNOOC listed in the city rose about 1%. Reuters reported on Wednesday that the Chinese oil company is preparing to abandon operations in several western nations due to fears of sanctions.

In other markets, the Nikkei 225 in Japan rose 1.22% to 27,172, while the Topix index rose 0.95% to 1,908.05.

In Australia, the S & P / ASX 200 rose 0.59% to close the trading day at 7,523.40. Australia’s unemployment remained at 4% in March, according to official data released on Thursday. It was slightly worse than expected in a Reuters poll for a 3.9% unemployment rate.

MSCI’s broadest index of Asia-Pacific equities outside Japan rose 0.43%. The markets in India are closed on Thursday due to a public holiday.

Monetary tightening in Singapore, S. Korea

Elsewhere, equities in South Korea and Singapore struggled for gains after the central bank of both countries announced monetary tightening on Thursday.

South Korea’s Kospi closed slightly changed at 2,716.71, while the Straits Times index in Singapore fell 0.15% in afternoon trading.

The Bank of Korea on Thursday announced a 25 basis point increase in its base rate to 1.5%, a decision predicted by less than half of economists in a Reuters poll.

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Following the decision, the Korean won traded at 1,224.03 per dollar, still stronger than levels above 1,232 against the dollar earlier in the week.

In Southeast Asia, the monetary authority in Singapore on Thursday also announced a tightening of monetary policy, its third in the last six months.

The Central Bank of Singapore said it would refocus the midpoint of the bond of the exchange rate policy, called the nominal effective exchange rate of the Singapore dollar, at its current level. The rate of appreciation of the political bond will also “rise slightly.”

The width of the policy band was left unchanged. MAS manages monetary policy by setting the exchange rate rather than interest rates.

The Singapore dollar strengthened to 1.3538 per dollar after the MAS announcement, compared to levels above 1.364 seen earlier in the week against the dollar.

JPMorgan Asset Management said in a note that Singapore and South Korea, as net energy importers, are “not spared” from the effects of higher commodity prices exacerbated by the conflict between Russia and Ukraine.

“While the inflation problem is not as severe as it is in many parts of the developed world, it is understandable that both central banks are trying to make sure they act proactively,” said Clara Cheong, global market strategist at JPMorgan Asset Management.

“Based on the price range, MAS is probably a bit more hawkish than expected, with the market now looking for another potential move in October,” added Eugene Leow, senior rate strategist at DBS Bank.

Currencies and oil

The US dollar index, which follows the dollar against a basket of its peers, was at 99,599 after a recent drop from over 100.4.

The Japanese yen traded at 125.26 per dollar, stronger than levels above 125.6 against the dollar yesterday. The Australian dollar was at $ 0.7451 after a recent bounce from levels below $ 0.744.

Oil prices were lower in the afternoon during opening hours in Asia, with international benchmark futures on Brent crude falling 1.31% to $ 107.36 per barrel. barrel. Futures on U.S. crude oil fell 1.48% to $ 102.71 per share. barrel.

Correction: This article was updated to reflect the fact that Clara Cheong is from JPMorgan Asset Management. An earlier version erred her title and organization in one case.

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