Asian markets fall on inflation pain; higher oil prices dent Indian rupee

Key points:

• Indian shares extend four-day losing streak, down 2%
• China, Hong Kong markets closed for holiday
• Bank Indonesia’s rate decision due on Tuesday

The energy-sensitive Indian rupee weakened on Monday, hurt by higher oil prices on concerns over tighter global supply, while other Asian currencies traded lower against a firmer U.S. dollar as inflationary pressures broadened.

Denting the region’s sentiment were expectations of a further aggressive U.S. rate policy tightening even as investors placed cautious bets coming out of a holiday-extended weekend.

The rupee (INR=IN) dipped as much as 0.3% to 76.43, its lowest level since March 22, further pinned by a sell-off in Indian shares (NIFTY), down nearly 2%.

The Malaysian ringgit (USDMYR), the Taiwan dollar (TWD=TP) and South Korea’s won (KRW=KFTC) eased about 0.3% each.

Investors appeared to show scant response to China central bank’s decision on Friday to cut the amount of cash that lenders must hold as reserves for the first time this year, a move to cushion a potentially sharp slowdown in economic growth.

With the absence of market clues from Europe due to Easter holidays, investor focus was on key economic data from China earlier in the day.

Data showed that China’s economy grew at a faster-than-expected clip in the first quarter, expanding 4.8% year-on-year. But the risk of sharp slowdown over coming months has risen as sweeping COVID-19 curbs and the Ukraine war take a toll.

Still, China stocks (000001) dipped 0.8% as market participants shrugged off the PBOC move as falling below their expectations, and possibly not enough to reverse economic slowdown.

“This cut will do little for lifting growth momentum as Shanghai’s lockdown, geopolitical tensions and property sector concerns go largely unaddressed,” according to a note from Mizuho Bank.

The Singaporean dollar (USDSGD) weakened 0.3%, while the Philippines peso (PHP=) pared early losses to trade 0.1% lower.

Similarly, the Thai baht (THB=TH) and the Indonesian rupiah (USDIDR) were marginally down 0.1%.

Among equities, banking stocks led Singapore benchmark index’s (STI) 0.7% drop, its lowest levels since March 17, while Malaysia (BURSA) fell for a third straight session, dipping 0.3%.

“There is some hesitation in the equity market ahead of results from Singapore’s banks. Interest rates may have run ahead of expectations and a counter-trend rally may be underway in favour of interest rate-sensitive sectors such as REITs,” Paul Chew Kuan Leng, head of Phillip Securities Research said.

Jakarta stocks (COMPOSITE) were an outlier in the region, climbing 0.4%, lifted by higher energy prices and ahead of a central bank policy meeting where an interest rate hike is expected as inflation risks persist.

“While BI (Bank Indonesia) is the most prominent central bank meeting this week, there will a lot of focus on the various Fed members scheduled to speak,” Mizuho Bank said.

Separately, the resource-rich country’s exports and imports hit record highs in March amid rising commodity prices due to the impact of the Ukraine war, statistics bureau data showed.

HIGHLIGHTS:

** Thai stocks (SET) down 0.1%, Philippines (.PSI) up 0.1%

** Malaysia’s 10-year benchmark yield touch a 4-yr high

** Top losers on Singapore (STI) index: Jardine Matheson Holdings (J36) down 1.57%; Hongkong Land Holdings (H78) 1.44%; United Overseas Bank (U11) 1.24% at S$30.38