Jay Powell's eight-minute speech at Jackson Hole has reverberated around the world, causing a hefty selloff among Asian stocks on Monday, particularly in export-oriented nations.
The Topix in Tokyo dropped 1.8% for the day, with the big-cap stocks in the Nikkei 225 seeing even heavier selling, leaving that index down 2.7%.
Shares in the tech-exporting markets of South Korea and Taiwan also saw hefty losses. The Taiex in Taipei fell 2.3%, while Kospi index in Seoul closed on a 2.2% loss.
In Thailand, shares fell 1.0%, after the Commerce Ministry reported disappointing export growth on Friday. The 4.3% export increase in July fell far short from a Reuters forecast of 11.2% growth.
Virtually all Asian markets moved into the red, as reflected in the overall MSCI All Countries Asia ex-Japan index, down 1.6% at the Asian close. Asian shares have lost 19.6% so far this year, worse than the 15.4% drop in U.S. shares and Europe's 12.2% decline. That takes Asian stocks close to the two-year low that they set in July before this summer's bear-market rally.
It's not a pretty picture, with Asian stocks forming a peak this February only to fall ever since. They are now back to levels set when the world was in recovery mode from the initial March 2020 selloff at the onset of the pandemic. It looks like they have further ground to lose.
In Australia, the S&P/ASX 200 index dropped 2.0%, with a 0.9% fall across the Tasman Sea for New Zealand stocks. The Asia Pacific region is also being buffeted by China's stop-start economic recovery, with progress repeatedly hampered by the snap lockdowns produced as Beijing chases a zero-Covid case count.
The futility of that fight is being reflected here in Hong Kong, where we once again have a skyrocketing infection rate. Hong Kong reported 9,708 new Covid-19 cases on Sunday, with the case count having climbed steadily over the summer. Hong Kong only faced its first massive outbreak of the virus in March, but is looking at a second spike.
People here aren't afraid of Covid but fear the government's response, with the Hong Kong administration intent on locking up infected people and their close contacts in facilities many locals compare to concentration camps. The government is warning it may not let state schools resume face-to-face classes as they are scheduled to do on September 1.
The Hang Seng in Hong Kong lost 0.7%, while Singapore shares fell 0.8% in the form of the Straits Times index. The Sensex in India is down 1.2% in afternoon trade.
Domestically oriented markets fared somewhat better. Mainland Chinese markets dropped 0.4%, with mainland investors generally unable to access international stocks and given few investment options outside the beleaguered Chinese property sector.
Many markets moved off their lows heading into the close. Indonesia saw the Jakarta Composite Index open on a 1.6% loss but finish only 0.04% in the red, with the world's fourth-largest population for the country's companies to fall back on. Malaysian shares were also some of the least-affected, with the FTSE Bursa Malaysia index only inching 0.01% lower.
Amid the gloom for Asian shares, Honda Motor (HMC) and T:7267 rose 0.4% after a report that the carmaker will create a factory in the United States to make lithium-ion batteries for electric cars. The Nikkei business daily said on Monday that Honda will team with the Korean company LG Energy Solution KR:373220 to set up the plant, with plans to start construction in 2023 and mass production in 2025. The companies aren't yet commenting on the plan, with the Nikkei reporting the plant would be in Ohio near Honda's main U.S. factory.
Last month, the Panasonic Holdings (PCRFY) and T:6752 subsidiary Panasonic Energy said it would build a new battery plant in Kansas, from which it will supply customers such as Tesla TSLA.
The battery factories would benefit from demand created by the incentives offered in the climate bill recently passed by Congress. Buyers of a new electric vehicle will receive a tax rebate of up to US$7,500.
Cars assembled outside the United States don't qualify for the tax credit. That is to the detriment of Asian carmakers such as Honda, Toyota Motor (TM) and T:7203, Kia (KIMFT) and KR:000270 and Hyundai Motor (HYMFT) and KR:005380.
Only one EV made by an Asian car company qualifies as U.S.-made, the Nissan (NSANY) and T:7201 Leaf, according to a U.S. Department of Energy list of 33 vehicles that stand to benefit from the credit.
