Asian stocks retreat on rate hike uncertainty, China outperforms

By Ambar Warrick

Investing.com -- Most Asian stock markets fell on Thursday following a string of hawkish comments from Federal Reserve officials, while Chinese stocks outperformed their peers amid persistent bets that the world’s second-largest economy will recover this year.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 0.8% and 0.6%, respectively, as markets bet on a recovery in activity after the lifting of most anti-COVID restrictions earlier this year.

State media reports showed that the People’s Bank of China injected fresh liquidity into the economy this week, as it moves to shore up growth from COVID-induced lulls.

Focus this week is now on Chinese inflation data due on Friday, with traders watching for more signs of a recovery in activity.

Sentiment towards Chinese markets was also supported by a successful initial public offering by auto parts maker Hesai Group, which reportedly raised $190 million in a U.S. offering. The offering is the largest by a Chinese issuer since the ill-fated Didi Global IPO, and potentially portends a comeback for U.S.-listed Chinese equities.

Hong Kong’s Hang Seng index also rose 0.3%, with phone maker Xiaomi Corp (HK:1810) rallying over 4%. The firm is one of the main investors in Hesai.

But broader Asian markets retreated amid renewed fears of U.S. rate hikes, following hawkish signals on monetary policy. Fed Governor Christopher Waller and New York Fed President John William both flagged more interest rate hikes this year amid strength in the jobs market and stubborn inflation.

Their comments came a day after Fed Chair Jerome Powell flagged a similar trend. Fears of tightening monetary policy were back in play this week after a substantially stronger-than-expected U.S. payrolls reading, which gives the Fed enough headroom to keep raising interest rates.

Focus is now on U.S. inflation data due next week, which is expected to provide more cues on the potential path of monetary policy.

Japan’s Nikkei 225 index fell 0.1% on Thursday, while Philippine stocks led losses across Southeast Asia with a 0.6% decline.

India’s Nifty 50 and BSE Sensex 30 indexes were little changed, as investors hunkered down ahead of more news on beleaguered conglomerate Adani Group.
Shares of the firm resumed a recent losing spree, with Adani Enterprises Ltd (NS:ADEL) tumbling as much as 15% after index operator MSCI questioned the free float categorization of some equities under the conglomerate.

MSCI is set to provide more details on its stance on Adani during a February index review due later in the day. Investors have called for the conglomerate’s removal from MSCI indexes, after a short-seller report alleged the firm was highly overvalued.