Asia markets tumble; Hong Kong, Japan and South Korea drop more than 3%

SINGAPORE — Shares in Asia tumbled on Monday, as major markets in the region saw sharp losses and the dollar-yen hovered around the 135 level.

Hong Kong’s Hang Seng index fell 3.39% to close at 21,067.58. Tencent shares fell 4.89% while Alibaba plunged 7.98%, the Hang Seng Tech index declined 4.72% to 4,598.65.

South Korea’s Kospi fell 3.52% to finish the trading day at 2,504.51, led by tech shares like Samsung Electronics which declined 2.66% while Kakao was down by 4.49%.

Japan’s Nikkei 225 dropped 3.01% to close at 26,987.44, and shares of conglomerate SoftBank Group fell 6.85%. The Topix index declined 2.16% to 1,901.06.

In Taiwan, the Taiex fell 2.36% to close at 16,070.98 and TSMC’s stock slipped 2.64%.

The implication that US inflation has not peaked; and that it seems to playing peek (peak)-a-boo; directly puts the US Fed in a bigger bind, committed to larger magnitude of rate hikes possibly for a longer period.

Lavanya Venkateswaran

Market Economist, Mizuho Bank

The Shanghai Composite in mainland China declined 0.89%, closing at 3,255.55, while the Shenzhen Component fell 0.298% to 11,999.31.

Worries surrounding mainland China’s Covid situation may have further weighed on Asia-Pacific investor sentiment on Monday. Beijing city suspended offline sports events, delayed return to schools and tightened other controls, just days after loosening them.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell about 2.8%.

Dollar-yen briefly touches 135

The losses in Asia came as the Japanese yen weakened as low as 135.17 per dollar on Monday, before recovering from some of those losses. The Japanese currency last changed hands at 134.42 against the greenback, but was still weaker compared to levels below last week’s 132 level against the dollar.

US Treasury yields were higher in the afternoon of Asia trading hours. The benchmark 10-year Treasury note yield climbed to 3.227% while the yield on the 2-year Treasury surged to 3.2056%. The two edged closer to an inversion — often seen as a potential recession signal.

In comparison, the yield on the 2-year Japanese Government Bond last stood in negative territory at -0.044%.

“Dollar-yen, I think if you look at the 2-year US Treasury-JGB yield differentials, I think it’s widening… especially with 10-year yields going up to above 3 and 3.2 levels or so,” Saktiandi Supaat, head of global foreign exchange strategy at Maybank, told CNBC’s “Street Signs Asia” on Monday.

“There’ll be resistance [for dollar-yen] at 135, I think they’ll break that possibly. My sense is, I think [Bank of Japan] and [Ministry of Finance] out of Japan would continue to jawbone and try to make sure… the weakness doesn’t continue to be too sharp but I think it’s going to be hard for them, “he said.

Markets in Australia were closed on Monday for a holiday.

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Later this week, a slew of Chinese economic data including industrial production and retail sales for May will be out on Wednesday.

The US Fed is also expected to announce its interest rate decision later this week. It comes after Friday’s hotter-than-expected US inflation numbers for May.

“For markets, the implication that US inflation has not peaked; and that it seems to playing peek (peak)-a-boo; directly puts the US Fed in a bigger bind, committed to larger magnitude of rate hikes possibly for a longer period , “Lavanya Venkateswaran, an economist at Mizuho Bank, wrote in a Monday note.

“Importantly, it is also still not clear when it will due to numerous factors, including Ukraine-Russia tensions and China digging its heel into a’zero covid’ policy, which will continue to put upside pressure on food and energy prices while keeping supply chains constrained. “

The US dollar index, which tracks the greenback against a basket of its peers, was at 104.658 after recently crossing the 104 level.

The Australian dollar was at $ 0.6991 after dropping from above $ 0.72 last week.

Oil prices were lower in the afternoon of Asia trading hours, with international benchmark Brent crude futures down 1.93% to $ 119.65 per barrel. US crude futures fell 2% to $ 118.26 per barrel.

— CNBC’s Evelyn Cheng contributed to this report.

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