Asia-Pacific Stock Indexes Finish Lower as Worries over Sino-US Tensions Dampened Risk Appetite

The major Asia-Pacific stock indexes closed lower on Friday as investor sentiment faded, following the weaker trade on Wall Street in the overnight session. A plunge in U.S. technology shares was the biggest drag in the region, while rising Treasury yields were the catalysts driving the price action.

In the cash market on Friday, Japan’s Nikkei 225 Index settled at 29792.05, down 424.70 or -1.41%. Hong Kong’s Hang Seng Index finished at 28990.94, down 414.78 or -1.41% and South Korea’s KOSPI Index closed at 3039.53, down 26.48 or -0.86%.

In China, the benchmark Shanghai Index settled at 3404.66, down 58.40 or -1.69% and in Australia, the S&P/ASX 200 Index finished at 6708.20, down 37.70 or -0.56%.

Japan’s Nikkei Dips on BOJ’s ETF Purchase Plan; Topix at 30-year High

Japan’s benchmark Nikkei Index fell while the broader Topix hit a 30-year high, as the Bank of Japan (BOJ) said it would only buy Topix-linked exchange traded funds after a review of its policy-framework.

The Nikkei’s fall accelerated after the BOJ said it would only buy ETFs that are linked to the Topix Index. It also said it would buy up to 12 trillion Yen ($110.21 billion) at most, and slightly broadened a trading band for its 10-year bond yield target, as widely expected.

The so-called NT ratio of the Nikkei and Topix dropped to 14.81 from 15.04 on Thursday. It had hit a record high of 15.68 earlier this month.

“The impact of the BOJ’s move on the Nikkei will be limited,” said Shingo Ide, chief equity strategist at NLI Research Institute. “It will contribute to a healthy correction in the NT ratio.”

Hong Kong Stocks Fall as Yields Spike, Rough Sino-US Talks Weigh

Hong Kong stocks ended lower on Friday, with energy shares leading the decline, as a spike in U.S. 10-year yields overnight and a rough start to China-U.S. bilateral talks weighed on investor sentiment.

The sub-index of the Hang Seng China Enterprises Index fell 1.63%. The sub-index of the Hang Seng tracking energy shares dipped 4.23%, while the materials sector dipped 3.68%, and the healthcare sector ended 3.15% lower.

Meanwhile, China and the United States leveled sharp rebukes here of each others’ policies in the first high-level talks of the Biden administration on Thursday, with deeply strained relations of the two global rivals on rare public display during the meeting’s opening session in Alaska.

Worries over Sino-U.S. tensions dampened risk appetite even as concerns over lofty valuations persisted, said Yan Kaiwen, an analyst with China Fortune Securities Co.

For a look at all of today’s economic events, check out our economic calendar.