Asia-Pacific stocks mostly slip as new Covid curbs in Shanghai dampen investor sentiment

SINGAPORE — Asia-Pacific stocks were mostly lower in Thursday trade, with mainland Chinese markets falling despite the release of better-than-expected May trade data.

The Shanghai Composite in mainland China slipped 0.76% on the day to 3,238.95 while the Shenzhen Component dropped 1.851% to 11,810.58. Hong Kong’s Hang Seng index shed around 0.9%, as of its final hour of trading.

Sentiment surrounding the Covid situation in mainland China may have dampened investor sentiment on Thursday, as the government announced that parts of Shanghai will re-impose new Covid restrictions.

China’s exports jumped 16.9% in May as compared with a year ago, Reuters reported Thursday. That bested expectations by analysts in a Reuters poll for a 8% rise.

Imports were also higher than expected, rising 4.1% against expectations for a 2% increase, according to Reuters.

“Whether strong Chinese export growth can be sustained remains uncertain. China’s zero covid policy, monetary policy tightening in export markets and the continued shift in consumption from goods to services in advanced economies are headwinds for Chinese exports,” said Carol Kong, a senior associate of currency strategy and international economics at the Commonwealth Bank of Australia.

“But a potential reduction in US tariffs on Chinese goods will bode well for demand for Chinese exports over time,” Kong wrote in a Thursday note.

In Japan, the Nikkei 225 closed slightly higher at 28,246.53 while the Topix index dipped fractionally to 1,969.05. South Korea’s Kospi ended the trading day mildly lower at 2,625.44.

Over in Australia, the S&P/ASX 200 dropped 1.42%, closing at 7,019.70.

MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.64% lower.

The European Central Bank is also expected to signal a July rate hike at its policy meeting later on Thursday. In Asia-Pacific, the central banks of Australia and India both announced rate hikes earlier this week.

Overnight on Wall Street, the S&P 500 shed 1.08% to 4,115.77. The Dow Jones Industrial Average slipped 269.24 points, or 0.81%, to 32,910.90. The Nasdaq Composite shed 0.73% to 12,086.27.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 102.546 in a turbulent week that has seen it go from levels below 102 to around 102.8.

The Japanese yen traded at 133.83 per dollar, weaker as compared with levels below 132 seen earlier in the week. The Australian dollar was at $0.7177, still off levels above $0.725 seen last week.

Oil prices were lower in the afternoon of Asia trading hours, with international benchmark Brent crude futures down 0.44% to $123.04 per barrel. U.S. crude futures shed 0.47% to $121.54 per barrel.