Asia stocks stifled by inflation, China concerns

Asian stocks weakened on Monday as investors worried inflation and rising interest rates would hamper the global economic outlook and China’s COVID-19 situation weighed on sentiment, with tech firms particularly hit, according to Reuters.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 0.3% as the region’s major markets traded in the red. Oil rose and gold extended its recent gains.

However, U.S. and European markets appeared to shrug off the gloomy Asian mood with the pan-region Euro Stoxx 50 futures up 1.35%, German DAX futures 1.4% higher and FTSE futures climbing 0.83%. S&P 500 futures rose 1.04%.

Australian shares (.AXJO) reversed early gains to be down 0.13% on Monday while Japan’s Nikkei stock index (.N225) bucked the regional trend and was 0.7% higher.

A negative tone was evident as Hong Kong’s Hang Seng Index (.HSI) slid 1.27% and the mainland’s CSI300 Index (.CSI300) dropped 0.7%, weighed by the tech sector. The Hang Seng Tech Index (.HSTECH) dropped 2.2% and is down 26.5% so far this year.

“The sell off in Asia is primarily driven by the negative global sentiment that exists at the moment,” Jack Siu, Credit Suisse’s greater China chief investment officer, told Reuters.

China’s tech sector, he added, would remain volatile until there was greater regulatory clarity and U.S markets stabilised.

Daily COVID-19 numbers in China remain closely watched by investors and Beijing on Monday reported 99 new infections for the previous day, the largest daily tally so far during a month-old outbreak.

The decline in China’s markets on Monday came after a surprisingly strong end to last week, when Hong Kong and mainland markets gained between nearly 2% and 3%.

There were $2.13 billion of net inflows to mainland stocks on Friday by foreign investors, the highest in 2022, according to stock exchange data.