Asia-Pacific markets fall as steel stocks slump across region

08:14, 18 January 2022

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Steel production in electric furnaces
Prices of iron ore hovered close to three-month high on Tuesday – Photo: Shutterstock

Hong Kong’s benchmark Hang Seng index fell on Tuesday despite property stocks gaining after the Chinese central bank cut lending rates a day ago, while stocks in Japan and Australia gave up early gains to end lower as steel stocks slumped across Asia.

Hang Seng index fell 0.8% to 24,022 as tech and healthcare stocks led losses in the region. CSPC Pharmaceutical Group and Tencent Holdings were the worst performer of the day, down 3.3% and 2.5%, respectively.

Hang Seng Mainland Properties index jumped 1.7% on Tuesday as Country Garden Holdings and China Overseas Land & Investment emerged as the top gainers in the region.

PBOC cuts lending rates 

On Monday, the People’s Bank of China (PBOC) cut seven-day reverse repo rate and reduced one-year medium-term lending facility rate to support the cash-strapped property sector.

Data released by the National Bureau of Statistics on Monday showed that property sales volume, value, new starts and real estate investments all dropped year-on-year in December.

On Tuesday, steel stocks slumped across Asia on the back of high raw material prices and weak property sector data coming out of China, the world’s largest consumer of steel.

Steel stocks slump across Asia-Pacific

Prices of iron ore, one of the main ingredients for steel, hovered close to three-month high on Tuesday. Data from Metals Market Index also showed rebar and hot-rolled coil Chinese steel consumption was significantly lower in January compared with a year ago.

Australia’s Bluescope Steel closed 1.9% lower on Tuesday. Kobe Steel and Japan Steel Work were among the biggest intraday percentage losers in Japan, down 6.8% and 4.8% respectively. South Korea’s POSCO, the world’s sixth-largest steel producer, ended 2.2% lower on Tuesday.

Analysts expect the Chinese real estate sector to remain weak in 2022 due to tight liquidity conditions, high debt levels and low consumer confidence.

Japan, Australia wipe out gains

In Japan, benchmark Nikkei 225 index erased early gains to close 0.3% lower on Tuesday as steel stocks dragged the index lower. Meanwhile, Australia’s benchmark S&P/ASX 200 index fell 0.1% as financial and healthcare losses overpowered gains in mining and tech stocks.

The Bank of Japan (BOJ) on Tuesday raised its economic growth forecast for 2022 and upgraded its inflation outlook for the fiscal year.

BOJ added that corporate profits are projected to continue on an improving trend on the back of a recovery in domestic and external demand.

Read more: China’s real estate sector unlikely to bounce back in 2022

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