Asian Stocks Slammed by U.S.-China Trade Jitters, Fed Woes

By Ambar Warrick 

Investing.com– Asian stocks fell sharply on Monday, with Chinese chipmakers leading declines on new U.S. trade curbs, while broader sentiment was dented by fears of more hawkish measures from the Federal Reserve. 

The bluechip index sank 0.9%, while the index shed 0.4%. Chipmaking stocks including Anji Microelectronics Tech Co Ltd (SS:) and Chengdu Xuguang Electronics Co Ltd (SS:) plummeted as much as 20% after the White House cutting off Chinese companies from certain semiconductor chips made with U.S. equipment. 

Hong Kong stocks were also rattled by the move, with the losing nearly 3%. Tech heavyweights Alibaba Group Holding Ltd (HK:), Baidu Inc (HK:) and Tencent Holdings Ltd (HK:) fell between 2% and 4%. 

The U.S. move threatens to worsen trade ties between the two largest economies in the world, and could have deeper economic implications if China retaliates.

Sentiment towards China was also worsened by data over the weekend showing the unexpectedly shrank in September, amid continued COVID-related disruptions. A recent resurgence in infections has also raised concerns over more lockdowns.

Focus this week is also on the 20th Congress of the Chinese Communist Party, which is expected to outline government policies for the next five years.

Broader Asian stock markets fell sharply on Monday, although trading volumes were muted due to holidays in Japan and South Korea. 

Australia’s index fell 1.4%, with miners suffering heavy losses on the prospect of weakening demand in China. Philippines’ index was the worst performer in Southeast Asia, down 1.1%.

India’s bluechip index fell 1.3%.  

Regional stocks took a weak lead-in from Wall Street, which plummeted on Friday after gave the Federal Reserve little reason to soften its hawkish tone. 

Focus this week is also on U.S. for September, due on Thursday. The reading, which is expected to show that inflation remained hot through last month, will also factor into the Fed’s stance on interest rates.

Markets are pricing in an the central bank will raise interest rates by 75 basis points in November. Rising U.S. interest rates have been the biggest headwind to Asian markets this year, and are likely to keep markets depressed for the near-term. 

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