“Trumpism is starting to get fully priced in to a certain extent,” said Greg McKenna, chief market strategist at forex broker AxiTrader, referring to the moderation in the selloff in the region.
The Hang Seng Index Index HSI, +0.61% reversed Monday’s steep losses and ended up 0.5%. Japan’s Nikkei Stock Average NIK, +1.15% closed about flat even the yen gained 0.3% against the U.S. dollar.
“I don’t think the dollar’s uptrend will be disrupted easily, but it would not be a surprise to see an adjustment of speed,” said Takuya Kanda, a senior researcher at Gaitame.Com Research Institute.
The S&P/ASX 200 XJO, +0.05% ended 0.4% lower, reacting to an overnight decline in commodity prices. BHP Billiton BHP, -2.77% BLT, -4.86% BHP, -3.05% dropped 1.2%, and Rio Tinto RIO, -3.49% RIO, -4.50% RIO, -3.83% fell 0.8%.
If Trump’s earlier campaign rhetoric is put in motion, U.S.-China relations look set for a significant shift.
Hong Kong-listed commodities companies were among the worst performers on the Hang Seng Index HSI, +0.61% . This followed a tightening of the rules for trading iron ore and steel rebar futures in China, to cool price gains and rein in rampant speculative trading.
Iron ore and steel rebar futures fell by the maximum 6% allowed on Tuesday in Shanghai, and Chinese metals and mining firms dominated losers in Hong Kong trade on the same day.
The Hang Seng Index tracking stocks in the materials industry led declines among Hang Seng subindexes, and was last down 1.1%.
Korea’s Kospi SEU, +0.74% slipped 0.4%, reversing earlier gains, but Singapore’s FTSE Strait Times STI, +0.48% was up 0.5%.
Japan financial stocks got a boost Tuesday when 10-year Japan government bond yields hit 0%, climbing out of negative territory for the first time since Sept. 21. Japan banks and insurance firms invest heavily in JGBs and profit greatly when yields rise.
Among individual stocks, Mitsubishi UFJ Financial 8306, +5.33% was up 4.2%, Sumitomo Mitsui Financial 8316, +5.22% climbed 3.8% while Mizuho Financial 8411, +6.62% gained 1.3%.
In Japan, the Topix bank subsection hit a nine-month high, ending up 2%.
U.S. President-elect Donald Trump has promised to roll out a large fiscal stimulus, lower corporate taxes and vastly increased infrastructure spending.
This has pushed up inflation expectations in the U.S. and the yields of U.S. Treasurys, vacuuming cash from Asian emerging markets.
However, Asian currencies broadly got a reprieve Tuesday. The Thai baht THBUSD, +0.084698% was up 0.4% against the U.S. dollar, with the Taiwan dollar TWDUSD, +0.330771% gaining 0.6% against the greenback, according to Thomson Reuters. The Indonesian rupiah IDRUSD, -0.38165114% , which has been battered by the flight of capital to higher-yielding U.S. assets, was down 0.2%. The Malaysian ringgit MYRUSD, -0.2530% stayed under pressure, and was last down 0.3%. The Korean won KRWUSD, +0.071135% was up 0.1%.
Meanwhile, China-share traders took in stride the fact that China’s onshore yuan dropped to an eight-year low against the U.S. dollar early Tuesday. The Shanghai Composite Index SHCOMP, -0.14% closed down only 0.1%.
A strong dollar drove the yuan devaluation, with the U.S. Dollar Index on Monday surpassing 100 for the first time since last December. But concerns of drastic capital outflows from China—aided by rising U.S. Treasury yields—have eased over the past two days, said Zhu Bin, an analyst at Southwest Securities. “Growing bearish sentiment on the U.S. bond market may hold off the Fed’s plan to hike rates,” Zhu said.
Meanwhile, Asia-Pacific government bonds extended losses Tuesday, with Malaysia’s 10-year debt yield touching a near 10-month high and Singapore’s 10-year debt yield climbing to 2.4%.