Asian stocks fell for the third consecutive session on Monday morning as traders worried about trade war escalations and struggling emerging markets, both of which have been weighing on the region. U.S. President Donald Trump said last week that he’s ready to unleash the next round of tariffs, which some analysts believe may be another 25 percent tariff on $200 billion of Chinese imports. A tariff of this magnitude would be considered a significant escalation in the trade war.
In China, the Shanghai Composite was down 0.73 percent as of 2:02 p.m. HK/SIN, and the Shenzhen Composite was down 1.07 percent. Japan’s Nikkei 225 was down 0.59 percent while Hong Kong’s Hang Seng Index was 0.92 percent lower. South Korea’s Kospi was down 0.72 percent in the afternoon.
Despite the fact that the trade war is, at the moment, only between the United States and China, other Asian economies seem to have been hit in the crossfire, with falling stock prices and trader concerns even in unaffected regions. Still, a J.P. Morgan survey publishe don Monday by CNBC showed that many Chinese investment professionals remain positive about Chinese markets. One-third of the 200 professionals surveyed predicted gains of 5 to 15 percent for domestic stocks. On the other hand, Americans are concerned that the trade war will intensify after the midterm elections on November 6.
Also pressuring markets are trade worries between the U.S., Mexico and Canada, as trade deals that were expected last week have not yet materialized. Talks are expected to continue this week between the U.S. and Canada, and President Trump has said that he plans to strike a new deal with Mexico within 90 days, even if the negotiations with Canada are unsuccessful.
Emerging Market Struggles
Emerging market currencies continued to struggle at the start of the week, with the Indonesian rupiah falling to its weakest level in over 20 years. The currency fell to 14,777 against the dollar on Monday, a price not seen since 1998. The rupiah has now shed 8.93 percent since the start of the year. The country’s government has said that it will intervene. Indonesia has the largest economy in Southeast Asia, but it maintains 41 percent of its government debt in foreign currencies, according to Moody’s. The debts are difficult to repay when the currency is so weak.
The Turkish lira also plummeted on Monday in advance of August inflation data. The lira has shed nearly 42 percent this year and its decline has sparked a contagion effect amongst many emerging market currencies, including the Indonesian rupiah.