South Korean shares tumble in a mixed session across the Asia-Pacific; China’s Shimao Group up 19%

SINGAPORE — Asia-Pacific markets traded mixed on Monday as investors kept an eye on the coronavirus pandemic and rising interest rates in the U.S.

In South Korea, the Kospi index fell 0.95% to 2,926.72 while the Kosdaq declined 1.49% to 980.38.

Chinese mainland shares rose, reversing earlier losses. The Shanghai composite was up 0.39% at 3,593.52 and the Shenzhen component added 0.44% to 14,406.97.

Australia’s benchmark ASX 200 fell 0.08% to 7,447.1. The heavily weighted financials subindex finished near flat, but the energy and materials indexes advanced 1.11% and 1.36%, respectively.

Shares of major miners rose: Rio Tinto added 2.28%, Fortescue was up 1.33% and BHP added 2.4%.

Hong Kong’s Hang Seng Index rose 1.08% to 23,746.54 while Taiwan’s Taiex added 0.38% to close at 18,239.38.

Shares of China Life Insurance in Hong Kong fell 1.63% in afternoon trade. Reuters reported that China’s Central Commission for Discipline Inspection said on Saturday that it had placed China Life Chair Wang Bin under investigation. The company’s Shanghai-listed shares fell around 1.74%.

Shimao Group shares jumped 19.15%, pulling back slightly from an earlier gain of more than 23%. That followed after Chinese business publication Caixin reported the embattled developer is selling all of its real estate projects, both residential and commercial.

Indian stock averages traded higher as the country deals with a third wave of Covid infections. Japan’s markets are closed for a public holiday.

Monday’s session followed a mixed session in Asia on Friday while stateside, the three major stock averages all declined.

The 10-year Treasury yield rose as high as 1.8% on Friday following the release of the December nonfarm payrolls report, where 199,000 jobs were added for the month. That fell significantly short of the market’s expectation for 422,000 jobs.

Last week, minutes from the U.S. Federal Reserve’s December meeting indicated that officials are ready to aggressively dial back policy support. It showed that the central bank is planning to shrink its balance sheet in addition to hiking interest rates.

Andrew Tilton, chief Asia-Pacific economist at Goldman Sachs, told CNBC’s “Squawk Box Asia” on Monday that the investment bank expects the Fed to raise interest rates three times in 2022 and it is likely to “start balance sheet runoff before the end of the year.”

“It’s very clear from Fed commentary and from continued high inflation that policymakers want to get started on these adjustments as quickly as possible,” he said.

Elsewhere, Covid cases have continued to rise sharply around the globe following the emergence of the highly transmissible omicron variant. Places like the U.S., Australia and U.K. have reported record number of cases in recent weeks.

“Early studies indicate that while Omicron is far more infectious than Delta, it is, mercifully, less likely to cause hospitalisations, and booster vaccines further reduce the risk of hospitalisation,” ANZ Research analysts said in a morning note.

“Unfortunately, as pandemic-induced supply shortages continue to proliferate, it’s clear that the inflation rollercoaster ride isn’t over,” they added.

In the currency market, the dollar index traded up 0.26% at 95.968 against a basket of its peers.

The Japanese yen changed hands at 115.71 per dollar, weakening from an earlier level around 115.53 while the Australian dollar traded up 0.14% at $0.7188.

Goldman’s Tilton told CNBC that the impact of the Fed’s rate hikes on Asia-Pacific currencies would likely be “manageable.”

“But, we would expect to see some pressures, especially where current accounts are deteriorating,” he said. Tilton explained that as the Covid situation improves, domestic demand in many countries would improve that will lead to greater imports and a deterioration in current account positions.

“That will mean greater funding needs, particularly for countries like Indonesia and India, and could potentially make them more sensitive to Fed policy as the year progresses,” Tilton added.

Oil prices reversed earlier losses on Monday during Asian trading hours: U.S. crude rose 0.28% to $79.12 a barrel while global benchmark Brent added 0.31% to $82.

“Geopolitical tensions are likely to impact commodity markets this week,” the ANZ Research analysts said. “Gas markets are on edge as tensions remain high in Ukraine, while unrest in Kazakhstan is threatening supply of key metals.”