Equity markets were pummeled on Friday, on growing fears that an expected strong global economic recovery this year would fan inflation and force central banks to hike interest rates, despite reassurances that ultra-loose monetary policies would be kept in place for as long as needed.
The rollout of COVID-19 vaccines, slowing infections and US President Joe Biden’s impending huge US stimulus package are proving to be a double-edged sword for traders as they weigh the much-needed return to pre-COVID-19 life with the prospect that prices could soar.
There is also a worry that this could threaten one of the key pillars of the rally on world markets from their nadir in March last year — record-low borrowing costs and a vast bond-buying program.
Alarm bells have been ringing for weeks as the yield on benchmark 10-year US Treasuries climbed to one-year highs, as investors moved out of the safe havens — yields rise as prices fall — and on Thursday a better-than-expected read on US jobless claims pushed them up further.
Yields have also advanced in other parts of the world, including Australia, France and Germany, New Zealand and even Japan, which has struggled for decades to fire inflation.
That sparked a hefty sell-off in New York on Thursday as all three main indices tanked — led by the NASDAQ’s 3.5 percent plunge as tech firms are more susceptible to higher interest rates.
Asia followed suit on Friday, suffering one of its worst sessions since the dark days of last March’s collapse.
In Taipei, the TAIEX closed down 498.38 points, or 3.03 percent, at the day’s low of 15,953.80. Turnover was NT$432.112 billion (US$15.27 billion). It declined 2.37 percent from a week earlier.
In Japan, the broader TOPIX declined 3.21 percent to 1,864.49 and posted a weekly loss of 3.34 percent, while the Nikkei 225 plunged 3.99 percent to 28,966.01, losing 3.50 percent from a week earlier.
In Hong Kong, the Hang Seng fell 3.64 percent to 28,980.21 and plunged 5.43 percent week-on-week, while the Shanghai Composite Index lost 2.12 percent to 3,509.08, losing 5.06 percent over the week.
Australia’s S&P/ASX 200 dropped 2.35 percent to 6,673.3, a weekly decline of 1.77 percent, while in Seoul, the KOSPI lost 2.8 percent to 3,012.95 and lost 3.05 percent from a week earlier.
“Markets have become myopically fixated on inflation,” Oanda Corp senior market analyst Jeffrey Halley said. “The expectations being that we will see an explosion in demand as vaccines reopen developed market economies. The fact is, data has shown we have seen an increase in demand anyway up till now, despite the pandemic walls erected globally.”
The selling comes despite constant reassurances from US Federal Reserve officials that they are not worried about inflation, and that the rise in US Treasury yields is a sign that the economic outlook is bright — and rates will not rise for the foreseeable future.
“With the US economic outlook boosted by pandemic improvement, vaccine distribution and the prospects of President Biden’s fiscal package getting through Congress, investors are now fixated on the risk of inflation and economic overheating,” said Tai Hui (許長泰), chief market strategist for Asia-Pacific at JP Morgan Asset Management. “Investors may not be fully convinced by the Federal Reserve’s commitment to keep monetary policy loose for an extended period.”
“The likely rise in headline inflation, partly due to the low base from 12-months ago, could challenge this dovish view, even though we agree that sustained demand-side inflation pressure is still some quarters away,” he said.
He added that the rise in yields “serves as a trigger to investors who have been looking for a reason for an equity market correction. Volatility will continue, but this could provide an interesting opportunity for investors to reload on equities.”
Additional reporting by CNA and staff writer
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day