Asia report: Markets fall as China trims one-year interest rates

Equities were lower at the close in Asia on Monday, as China’s central bank cut its main lending rate for the first time in 20 months amid ongoing concerns of the growing spread of the Omicron variant of Covid-19 globally.

In Japan, the Nikkei 225 was down 2.13% to close at 27,937.81, as the yen strengthened 0.08% against the dollar to last trade at JPY 113.54.

Of the major components on the benchmark index, automation specialist Fanuc was down 2.97%, fashion firm Fast Retailing lost 2.2%, and technology conglomerate SoftBank Group was 2.5% lower.

The broader Topix index was 2.17% weaker by the end of trading in Tokyo, settling at 1,941.33.

On the mainland, the Shanghai Composite slipped 1.07% to 3,593.60, and the smaller, technology-heavy Shenzhen Composite slid 1.77% to 2,478.42.

The People’s Bank of China announced earlier in the session that it was cutting its one-year loan prime rate to 3.8% from 3.85%, making for the first trim to the rate since April last year.

It was in line with what many market participants were anticipating, with the majority of traders and economists polled by Reuters expecting the one-year rate to be lowered.

“The PBoC’s decision to lower its benchmark 1 year loan prime rate for the first time in 20 months today came as a surprise to many analysts,” analysts at Rabobank noted, adding that while 29 out of 40 forecasters in the Reuters survey had anticipated a move, the consensus in the Bloomberg survey was for an unchanged announcement.

“Recent indicators including retail sales and investment growth have slowed in China and further monetary easing could follow,” Rabobank said.

“That said, the move does raise some concern that the authorities could stimulate the country’s already highly leveraged property market.”

South Korea’s Kospi was 1.81% weaker at 2,963.00, while the Hang Seng Index in Hong Kong lost 1.93% to 22,744.86.

The blue-chip technology stocks were in the red in Seoul, with Samsung Electronics down 1.15% and SK Hynix losing 1.23%.

Oil prices were on the slide at the end of the Asian day, with Brent crude last down 4.23% at $70.41 per barrel, and West Texas Intermediate losing 4.72% to $67.38.

In Australia, the S&P/ASX 200 was 0.16% lower at 7,292.20, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was the region’s odd one out, eking out gains of 0.38% to end the session at 12,766.45.

The Wellington bourse was led higher by ventilator maker Fisher & Paykel Healthcare, which was 3% higher by the end of trading.

Both of the down under dollars were weaker against the greenback, with the Aussie last off 0.38% at AUD 1.4089, and the Kiwi retreating 0.33% to NZD 1.4893.