Asia Markets Drop Over Geopolitical Tensions

On Tuesday, Hong Kong and mainland China markets were leading losses in Asian markets, as geopolitical tensions climbed due to the visit of Nancy Pelosi, the US House of Representatives Speaker, to Taiwan.

China and Hong Kong

There was a 2.26% decline in the Shanghai Composite, which came down to 3,186.27, and a 2.37% drop in the Shenzhen Composite that bringing it to 12,120.02.

Both indexes hit session lows of almost 3%. The Hang Seng index in Hong Kong dropped 2.36%, which saw it come down to 18,689.21.

This was because of a drop in heavyweights like Meituan and Alibaba, which declined by 2.11% and 2.85%, respectively. There was also a 3.01% drop in the Hang Seng Tech index.

According to local media reports, Pelosi’s visit to Taiwan would go as per schedule, a self-ruled island that Beijing considers its own territory.

Beijing said about Pelosi’s trip that its army would not just sit idle and would protect the territorial integrity and sovereignty of the country.

Market analysts said that US-China tensions would climb significantly because of the visit and were probably going to result in a reaction that would lead to conflict.

Reactions and developments

There was a 2.38% drop in the shares of Taiwan Semiconductor Manufacturing Company, while the wider Taiex index saw a loss of 1.56% to reach 14,747.23.

Market analysts said that the dollar-yen currency pair could respond to developments. They also said that geopolitical risk is always relevant when it comes to the forex market, but it can be difficult to predict.

Safe-haven assets were in high demand for the day, which saw the Japanese yen trading at 130.93 against the dollar. It has been on a strengthening trend since the previous week.

Other Asian markets

There was a 1.42% drop in the Japanese Nikkei 225 index, which closed at 27,594.73, while a 1.77% decline in Topix saw it close at 1,925.49.

There was a 0.52% drop in the Kospi index in South Korea, which fell to 2,439.62, while a 0.4% drop in the Kosdaq saw it come down to 803.34.

There was a 6.3% increase in South Korean consumer prices in July, as compared to the same period last year. This is in accordance with expectations, as prices accelerated at a fast pace last seen in November 1998.

In July, the Bank of Korea hiked its interest rates by 50 basis points. The Australian S&P/ASX 200 index also made a recovery from earlier losses, as it closed higher at 6,998.1

A 50 basis points rise in the interest rates was announced by the Reserve Bank of Australia on Tuesday. This was after last week’s official data showing second quarter price increases to be around 6.1%.

After the announcement of the RBA’s decision, the Australian dollar lost some ground and was the last trading at $0.6921, as it came down from the $0.70 level.

There was also a 1.31% decline in the MSCI’s index of Asia-Pacific shares excluding Japan. Overnight trading in US markets also recorded declines in indexes.

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