By Ambar Warrick
Investing.com -- Asian stock markets fell on Monday as stronger-than-expected U.S. inflation data ramped up concerns over rising interest rates and a hawkish Federal Reserve, while uncertainty over upcoming Chinese economic indicators also weighed.
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell about 0.2% each, with focus turning to an upcoming reading on the Purchasing Managers’ index, due on Wednesday. The data is expected to show a mixed recovery in Chinese business activity, with the manufacturing sector set to remain in contraction in February.
Chinese stocks have largely reversed an early-2023 rally as middling economic data painted a mixed picture of a recovery, even as the country relaxed most anti-COVID restrictions earlier this year. While a recovery in China bodes well for the country's Asian trading partners, uncertainty over the timing of such a recovery has dented sentiment in recent weeks.
Risk-heavy southeast Asian stocks were the worst performers for the day, with Philippine stocks leading losses in the region with a 1.7% drop. Australia's ASX 200 index sank over 1% on losses in major miners BHP Group Ltd (ASX:BHP) and Rio Tinto Ltd (ASX:RIO).
Tech-heavy bourses also suffered, with the Taiwan Weighted index and South Korea’s KOSPI losing 0.7% and 1.2%, respectively. Hong Kong's Hang Seng index lost 0.3%.
Broader Asian markets retreated as data on Friday showed that the Personal Consumption Expenditures index - the Fed’s preferred inflation gauge - grew more than expected in January. The reading gives the Fed more headroom to keep raising interest rates, and espoused a bearish outlook for Asian markets.
The reading pushed up the dollar and Treasury yields, drawing capital flows out of Asian stocks and into relatively safer bets. Rising U.S. interest rates dent the potential returns from Asian markets, and also limit the amount of foreign capital flowing into the region.
Regional central banks also hike their benchmark rates to keep pace with the Fed, which in turn weighs on liquidity conditions.
India’s Nifty 50 and BSE Sensex 30 indexes fell about 0.8% each, with losses in heavyweight technology and industrial stocks weighing the most. Adani Enterprises Ltd (NS:ADEL) slumped over 5% after reports said the firm was in talks to raise up to $400 million in debt, even as a recent short sellers report raised concerns over the firm's stretched debt position.