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Asian Indexes Finish Lower; Gold Mining, Defense Company Shares Rise

Conflict-related tensions lifted shares of Chinese goldminers and defense companies, with the CSI national defense industry index rising to a near four-month high as discussions of a war intensified.
James Hyerczyk
Shanghai Stock Exchange.

The major Asia Pacific shares finished lower across the board on Wednesday. The markets plummeted on reports that Iranian missiles were fired at an Iraqi airbase that hosts American troops, but then rebounded slightly from their lows later in the session.

It was not immediately clear if any U.S. service members were hurt in the strikes and President Donald Trump responded on Twitter, saying he will make a statement on Wednesday morning during U.S. hours.

On Wednesday, Japan’s Nikkei 225 Index settled at 23204.76, down 370.96 or -1.57%, South Korea’s KOSPI Index finished at 2151.31, down 24.23 or -1.11% and Hong Kong Hang Seng Index closed at 28087.92, down 234.14 or -0.83%.

In China, the Shanghai Index settled at 3066.89, down 37.91 or -1.22% and in Australia, the ASX/200 Index finished at 6817.60, down 8.80 or -0.13%.

China

Goldminer and Defense Shares Rise

China shares fell the most in two weeks on Wednesday, reversing some of the sharp gains recorded in the past fortnight.

Conflict-related tensions lifted shares of Chinese goldminers and defense companies, with the CSI national defense industry index rising to a near four-month high as discussions of a war intensified.

The Shanghai Composite Index and blue-chip stocks both shed more than 1%, marking their largest daily losses since December 23, 2019. Earlier in the session, the Shanghai benchmark touched its lowest in more than a week.

Higher Oil Prices Threaten China Economy

Yang Tingwu, vice general manager of hedge fund house Tongheng Investment, said his worst nightmare was that of a spreading Middle East crisis push oil prices higher, threatening to push China into stagflation.

“I don’t think the trade war is a big issue now,” said Yang. “But a possible surge in energy prices will result in stagflation in China, limiting central bank’s policy choice.”

If that happens, “Chinese stocks will descend into a gloomy, downward trend,” he added.

Australian Shares Trim Losses

Australian shares trimmed losses on Wednesday after U.S. President Donald Trump’s comment on the Middle East tensions reassured investors rattled by Iranian missile attacks on U.S.-led forces in Iraq earlier in the day.

The actual attack stoked concerns about a broader regional conflict, but sentiment was lifted after Trump tweeted late Tuesday that “all is well!”, and added that an assessment of casualties and damage from the strikes was under way and that he would make a statement on Wednesday morning.

Markets pulled back from the losses as the rhetoric was not as harsh as investors were expecting, said James Tao, market analysts at CommSec.

Safe-haven gold stocks surged 3.2% to a near-month closing high, with heavyweight Newcrest Mining adding 4%. Northern Star Resources gained 2.5%, while Evolution Mining rose 2.1%.

The energy sector extended gains for a fifth straight session as oil prices surged on concerns over crude supply disruptions in the Middle East. Woodside Petroleum tacked on 1.4%, while smaller peer Santos climbed 1.1%.

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