Asia Stocks Decline Amid Ongoing Recession and Rate Hike Concerns

By Ambar Warrick

Asian stocks experienced a downturn on Monday, continuing the losses from the previous week amid growing concerns over rising interest rates and the possibility of a recession in 2023. Additionally, uncertainty surrounding China’s economic reopening further impacted regional market sentiment.

Japan’s stock market was significantly affected, with a drop of 1.1% as speculation increased regarding the potential tightening of the Bank of Japan’s (BoJ) accommodative monetary policy. Reports have indicated that the Japanese government is contemplating revising the BoJ’s inflation target, which could lead to an increase in interest rates from historically low levels.

Market attention is also fixed on the upcoming announcements from the central bank, where it is anticipated to keep its benchmark rate unchanged. However, traders are closely monitoring any shifts in the bank’s stance.

In China, the blue-chip index declined by 1.3%, and another index saw a 1.6% drop as rising COVID-19 cases overshadowed government efforts to bolster economic growth. The nation is grappling with an unprecedented surge in COVID-19 infections following the easing of lockdown measures earlier this month, raising fears that this may hinder a broader economic reopening.

A recent survey revealed that economic sentiment is at its lowest in nearly a decade due to the pandemic exposing significant vulnerabilities in the country’s economy. In Hong Kong, stock indices, heavily reliant on the Chinese market, also fell by 0.6% each.

The broader Asian market struggled in the wake of hawkish signals from several major central banks last week, increasing worries that soaring interest rates and inflation might lead to a recession next year. The positions taken by the central banks have unsettled investors who are already contending with rising borrowing costs. Although these banks indicated a slower pace of rate increases, they are projected to peak at higher-than-anticipated levels.

Meanwhile, South Korea’s index experienced a smaller decline of about 0.4%, aided by government forecasts suggesting that the economic downturn may reach its lowest point by mid-2023. This, combined with a potential rebound in China, could lead to a robust recovery for South Korea’s economy by 2024.

Contrarily, Indian stocks defied the trend as investors showed renewed interest after two consecutive weeks of losses. The main stock indices each gained about 0.5%. India’s optimistic economic growth projections have buoyed its stock market this year, contributing to record highs for two leading benchmark indices in November.