Asian currencies and equities slip on weak China trade data

ASIAN currencies and stocks traded lower on Tuesday after exports in China fell much faster than expected in July, while investors brace for inflation data from China and the United States due later in the week.

The Chinese yuan eased 0.2% and stocks in the region fell 0.4%.

The South Korean won led losses in the region, weakening 0.7% to hit it lowest in over a month, while Thailand’s baht and the Taiwan dollar fell 0.4% each.

Outbound shipments from China, the world’s second-largest economy, posted the biggest rate of decline since February 2020, and imports of major commodities lost momentum in a further sign that the economy is struggling to recover.

Industrial production in Malaysia followed suit, falling at a faster-than-expected pace in June. The ringgit weakened 0.3%, while shares climbed 0.3%.

“Malaysia’s manufacturing industrial production remains relatively resilient compared with the rest of Emerging Asia,” analysts at Barclays said in a note.

They added that they see a base case of no further rate hikes, but the “door is still open”.

Equities across the region were mostly lower as investors digested the weaker Chinese trade data, but focus will now shift to key inflation readings from China and the United States, due on Wednesday and Thursday respectively, for more clues on the health of the global economy.

Shares in Taiwan led losses in the region, slipping 0.7%, while the benchmark in Indonesia inched lower.

Thailand’s benchmark, the worst performing equities in the region, slipped 0.2% as political uncertainty continues in Southeast Asia’s second-largest economy, with its populist Pheu Thai party forming an alliance with the Bhumjaithai party on Monday and said it was open to other parties joining to form a government.

Meanwhile, the Philippines posted a trade deficit of $3.92 billion for June, the narrowest since February.

The data came ahead of the release of the country’s second-quarter gross domestic product (GDP) print on Thursday.

Josua Pardede, a chief economist at PermataBank, said the narrowing trade deficit reflects likely easing in consumption and investment and he sees second-quarter GDP falling to around 5.9% to 6.0% year-on-year.

HIGHLIGHTS

** Japan’s real wages down for 15th month in test for BOJ policy, economy

** Indonesian 10-year benchmark yields are up 1.9 basis points at 6.366%

** India rate panel to dial up hawkishness even as it holds policy steady – Reuters