Asia report: Markets fall as RBNZ hikes official cash rate

Equity markets in the Asia-Pacific region closed in negative territory on Wednesday, February 22, after the Reserve Bank of New Zealand raised interest rates to a 14-year high.

Japan's Nikkei 225 closed at 27,104.32, down 1.34%, while the Topix dropped 1.11% to 1,975.25.

Tokyo Gas plunged 6.43%, while T&D Holdings declined 5.9%, and Fujikura slipped 4.76%.

China's Shanghai Composite was down 0.47% at 3,291.15, and the Shenzhen Component decreased 0.57% to 11,900.12, with Aerosun Corporation falling 4.64% and Chongqing Wanli New Energy down 4.22%.

Hong Kong's Hang Seng Index fell 0.51% to 20,423.84, with Techtronic Industries dropping 6.94%, Ping An Insurance down 3.05%, and Country Garden Services slipping 3%.

South Korea's Kospi was down 1.68% to 2,417.68, with KG Dongbu Steel dropping 14.19%, and Seoul Broadcasting System slipping 10.75%.

Australia's S&P/ASX 200 fell 0.3% to 7,314.50, with Domino's Pizza Enterprises down 23.81%, Coronado Global Resources down 6.81%, and James Hardie Industries down 4.66%.

New Zealand's S&P/NZX 50 dropped 0.06% to 11,794.22, with Restaurant Brands NZ down 6.13% and Serko down 5.46%.

The New Zealand central bank lifted its rates by 50 basis points from 4.25% to 4.75%, in line with economists' expectations, with indications that interest rates could still rise to ensure inflation returns to its target range.

“While there are early signs of price pressure easing, core consumer price inflation remains too high, employment is still beyond its maximum sustainable level, and near-term inflation expectations remain elevated,” the Reserve Bank said.

The move came ahead of the Bank of Korea’s expected halt to its hiking cycle on Thursday, which would make it one of the first central banks in the region to do so compared to its global peers, except Japan and China.

Australia's central bank lifted its rates by 25 basis points earlier this month.

“Despite signals in November of a further 75-basis point hike to come, the RBNZ ultimately opted for a smaller hike in the face of the recent weather disasters in New Zealand which have ravaged parts of the country and are expected to exacerbate economic issues,” said James Harte at TickMill Group.

“Along with the smaller hike, the RBNZ also forecast a further pivot in April with a projected 25-basis point hike.”

Harte said that while the bank maintained its peak rate level, it also said it now expected to take longer to hit that rate with a slower pace of tightening now planned over 2023.

“However, the RBNZ was clear in reaffirming that it will continue with tightening this year in order to drive inflation down.”

In economic news, Japan's producer price index rose 1.6% year-on-year, slightly higher than the 1.5% print in December.

The index now stood at 107.4, down from 107.7 in December, making for the first monthly fall since August last year.

Bank of Japan board member Naoki Tamura meanwhile said in a speech that it would be appropriate for the central bank to stand pat on its ultra-easy monetary policy.

“At this point, I think it is appropriate to continue with monetary easing,” he said.

In Australia, the wage price index rose by 3.3%, missing expectations for a 3.5% increase.

On a quarterly basis, wages were ahead 0.8%, below the 1% economists had pencilled in, with private sector pay rising 0.8% and public sector wages ahead 0.7%.

Finally on the economic front, a Hong Kong official said the city’s economy was expected to see a rebound of between 3.5% and 5.5% this year, after a 3.5% contraction in GDP last year.

Financial secretary Paul Chan said the special administrative region’s underlying and headline inflation would rise to 2.5% and 2.9% respectively this year, and noted that Hong Kong's economy would see “abundant opportunities” in the mid-to-long term.

Oil prices dipped on Wednesday, with Brent crude futures last down 1.36% on ICE at $81.92 per barrel, and the NYMEX quote for West Texas Intermediate slipping 1.56% to $75.17.

In currency markets, the US dollar weakened against the Japanese yen, falling 0.07% to JPY 134.91.

However, the greenback gained on the Australian dollar, up 0.51% to AUD 1.4665, and rose slightly against the Kiwi, advancing 0.06% to NZD 1.6083.

Reporting by Josh White for Sharecast.com.