(Reuters) - Asian stocks sank in May, halting a four-month-long rally, as an increase in U.S. tariffs on Chinese goods lowered the chances of an immediate trade deal between the world’s two largest economies and stoked concerns about a global economic downturn.
In May, the MSCI’s broadest index of Asia-Pacific shares, shed about 6.2%, its steepest monthly decline since October 2018.
Optimism over a Sino-U.S. trade deal — which boosted investments in riskier assets earlier this year — dwindled after the United States raised tariffs on $200 billion worth of Chinese imports to 25% from 10% on May 10. China retaliated by raising tariffs on $60 billion worth of U.S. imports effective June 1.
Adding to trade war fears, U.S. President Donald Trump unexpectedly threatened to impose a 5% tariff on all goods coming from Mexico starting on June 10 until illegal immigration across the U.S.-Mexico border is stopped.
In May, equities markets in Hong Kong, Singapore, Japan, South Korea and China, all fell between 5% to 10%.
Graphic: Asian-Pacific equities monthly price change - May tmsnrt.rs/2WI2vfL
On the other hand, Indian markets led the region, gaining about 1.5%, following Prime Minister Narendra Modi’s dramatic win in India’s general elections. Australia and New Zealand, also secured solid gains last month.
Graphic: Asia-Pacific equities performance in 2019 tmsnrt.rs/2WEkqUM
Reporting by Gaurav Dogra and Patturaja Murugaboopathy Bengaluru; Editing by Jacqueline Wong