Led by Hong Kong, Asian stocks are on course for their worst month since the start of Covid

Hong Kong
CNN business

Asian markets are evolving The worst month since the start of the Covid pandemic, boosted by a strong US dollar and fears of a global recession.

MSCI Asia Japan Index – Catcher 10 major markets Asia as a whole, excluding Japan, is down 12.8% this month, on track for its biggest decline since March 2020 since the Covid-19 pandemic wreaked havoc on global markets.

The index will end the third quarter down almost 14%.

Among the major stock markets, Hong Kong and South Korea had their worst month to date, down 14% and 12%, respectively.

For the quarter, the Hang Seng Index (HSI) has fallen 21% year-to-date, heading for its worst quarter in two decades, according to Refinitiv.

Worries about a global recession and dark policies from central banks around the world have weighed on investor sentiment.

The US dollar rose to a two-decade high against a basket of major counterparts on Wednesday, boosted by the Fed’s policy tightening. The greenback’s rise has fueled further fears of capital outflows from Asian emerging markets.

The Chinese yuan hit a low of 7.2674 against the dollar in the offshore market earlier this week. It rebounded on Thursday after reports of possible central bank intervention.

The onshore Yuan, traded in the well-run domestic market, rebounded to 7.11 on Friday. But the offshore yuan, which trades more freely overseas, fell again on Friday. It was trading at 7.108 per dollar at around 1:15 a.m. Eastern.

The Japanese yen and the Indian rupee also hit all-time lows this week.

“The US dollar’s upward journey continues to drive protective flows and concerns about Asian equities continue to rise,” Manishi Raychaudhuri, head of Asia-Pacific Equity Research at BNP Paribas Securities, said in a research note this week.

“Foreigners continued to sell Asian stocks,” Citi analysts said in a report on Friday. Taiwan, Japan, India and South Korea reported nearly $5 trillion in foreign outflows this week.

However, Raychaudhuri expects some silver supplies for Asia.

“There will be some headwinds for Asian stocks in the form of post-Covid reopenings – in Hong Kong, Japan, Taiwan and potentially China,” he said.

There is also some good news from China this week.

On Friday, China’s official manufacturing purchasing managers’ index showed the country’s factory activity rose unexpectedly in September, boosted by recent stimulus measures and a heat wave, according to a government statement. The PMI rose to 50.1 in September, returning to expansion territory after two straight months of contraction.