ASIA MARKETS: Shares, Currencies Mixed; Focus on US Yields, China Evergrande

Friday,   24-Sep-2021   09:44 AM (IST)

Asian shares and currencies were trading mixed amid uncertainty on China Evergrande’s dollar bond coupon payments and a jump in Treasury yields on likelihood of reduced central bank support. Shares in Hong Kong and South Korea were little changed and were down 0.3% in Singapore and Australia. Chinese equities advanced 0.7%. Japan’s index was the top performer, climbing 2% amid a drop in the Japanese yen to below 110 to the dollar. Asian equities struggled for direction despite U.S. stocks managing to build on Wednesday’s advance. Investor focus remain on China Evergrande’s debt troubles as an interest payment on a dollar bond was due yesterday. According to a Reuters report, holders of the dollar bond were waiting for information on the payment and the company had not made any announcement on the payment so far. Meanwhile, Asian equities had to contend with another relatively hawkish comments from another major central bank. A day after the U.S. Federal Reserve signaled that it will likely reduce the pace of bond purchases in November, the Bank of England said yesterday that worries on inflation had strengthened the need to increase borrowing costs. The BoE said inflation is poised to top 4%, twice its medium-term target. Following the BoE review, interest futures priced in a 90% chance of a rate increase in February next year, according to Reuters. Yields on the 10-year U.K. bond and Treasuries surged yesterday. The 10-year Treasury yield yesterday jumped almost 14 basis points to reach above 1.40%, the highest in more than two months. U.S. equities were not impacted by the jump in yields with the S&P 500 Index rising more than a percent. Equities and yields moving higher in tandem suggested that investors were increasingly confident about the growth outlook. The dollar index was little changed after slipping yesterday. The onshore Chinese yuan inched lower to the dollar while the Thai baht advanced. The Malaysian ringgit was little changed at 4.18 ahead of the August inflation data that is expected to show that prices increased 2.2% year-on-year.