Asian Commodities-Linked Stocks Slide as China Talks Prices Down

Companies linked to commodities led declines in Asian stocks for a second day amid growing global concerns over inflation and rumblings by the Chinese government about climbing materials prices.

Australian miner BHP Group Ltd. and Korean steelmaker Posco were among the biggest drags on the MSCI Asia Pacific Index on Thursday. Energy fell the most among the regional benchmark’s 11 industry groups, as stocks including PetroChina Co. and Yanzhou Coal Mining Co. tumbled 5%-10%.

Asian Commodities-Linked Stocks Slide as China Talks Prices Down

Metal prices tumbled in overnight sessions on Chinese exchanges, with iron ore dropping 6.5% and and coking coal sliding 7.5%. Oil futures steadied after sliding about 3% Wednesday on inflation fears as well as hopes for a new Iran nuclear deal.

The rapid downturn comes just weeks after major investment banks and trading houses including Goldman Sachs Group Inc., Citigroup Inc. and Trafigura Group boldly forecasted the start a new era of booming raw material markets.

Even with the recent declines, materials stocks are still the biggest gainers on Asia’s key stock index this year, up more than 9%, with energy stocks at No. 3 with a 6% gain. Hopes for economic reopenings had driven economically sensitive stocks and commodities higher until the price concerns flared up last week.

The Chinese government has helped pour cold water on those rallies this week. Commodity supplies should be ensured and there needs to be efforts to prevent rising prices from being passed on to consumers, state broadcaster CCTV reported Wednesday, citing a State Council meeting chaired by Premier Li Keqiang.

“Commodity inflation has pushed China to meaningfully slow credit growth this year and implement non-monetary measures designed to slow construction capex growth, one of the main drivers for materials demand,” KeyBanc Capital Markets analysts led by Philip Gibbs wrote in a note. “Traditionally, this has been a bearish signal for commodity stocks.”

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.