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Asian FX, Stocks Drop on New Coronavirus Variant Concerns

  • Risk-off sentiment weighs on regional stocks, FX
  • Haven FX have outperformed at emerging FX's expense - analyst
  • Indian stocks hit lowest since Sept. 2

Nov 26 (Reuters) - Shares and currencies in Asia's emerging markets fell sharply on Friday, as investors fled riskier assets after the detection of a new and possibly vaccine-resistant coronavirus variant, which in-turn strengthened safe-haven assets like the dollar.

Indian stocks dropped more than 2% to hit their lowest since early September, while shares in Taiwan, South Korea, Singapore, Thailand and Indonesia fell between 1.5% and 1.6%.

Scientists have said the new COVID-19 variant, detected in South Africa, may be able to evade immune responses. British authorities think it is the most significant variant to date and worry it could make vaccines less effective and hurt efforts to fight the pandemic.

"With the delta wave in mind from earlier this year, investors are likely to shoot first and ask questions later until more is known about it (the new coronavirus variant)," Jeffrey Halley, senior market analyst, Asia Pacific, OANDA, said in a note.

The news about the South African variant ramped up selling pressure in regional markets, already reeling under broad dollar strength due to bets that an increasingly hawkish U.S. Federal Reserve will lift rates by the middle of next year.

"Risk-off trades owing to (the) new South African variant scare was the dominant driver while (the) policy divergence thematic takes a back seat," said Christopher Wong, senior FX strategist at Maybank.

He added that if the new variant becomes a "real concern", it would overshadow recent drivers including policy normalisation.

Separately, a handful of local COVID-19 cases in eastern China led to the closing of some tourist and public transport activity, exarcebating risk-off sentiment in the broader region. Shares in Shanghai fell 0.5%. 

The Thai baht , Indonesian rupiah , Singaporean dollar and South Korean won fell 0.3-0.7%, while the yuan , which has provided some support to these currencies over the week, also weakened.

"Haven currencies have outperformed at the expense of emerging and commodity/risk sentiment currencies," Halley added.

Virus woes have also raised concerns in South Korea, where the health minister said the government is reviewing whether to make changes to its 'living with COVID-19' policies, as cases continue to rise. 

The Philippine government said it would reopen its borders to tourists from some countries on a trial basis from Dec. 1, as part of efforts to rebuild an economy hit hard by the pandemic. The country's benchmark stock index fell 1.2%.


** Thai baht leads losses among Asian FX

** Taiwan shares eye worst day since Oct. 1

** Singapore shares hit lowest since Oct. 18

Reporting by Harish Sridharan in Bengaluru; Editing by Rashmi Aich

Source: Reuters

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