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In Asia, Stock Sell-Off Continues as Markets Sink Stock Sell-Off Continues as Markets Sink
(about 2 hours later)
HONG KONG — The sell-off that sent stocks around the world lower last Friday continued in Asia on Monday, as investors fretted about slowing growth in China and the prospect that the Federal Reserve would continue to scale back its support of the United States economy. BRUSSELS — Global stocks picked up Monday where they left off last week, with key indexes falling from Tokyo to London and emerging markets losing more ground amid fears of capital flight.
Markets slumped across the Asia-Pacific region, with declines of nearly 1.6 percent in both South Korea and Taiwan. The Hang Seng Index in Hong Kong was 2 percent lower by midafternoon, the Straits Times Index in Singapore was down 1.3 percent, and in mainland China, the Shanghai composite index ended 1 percent lower. Markets slumped across the Asia-Pacific region, with the Japanese benchmark Nikkei 225 dropping 2.5 percent to its lowest close since November. Investors, fretting about slowing growth in China and the prospect that the Federal Reserve would continue to scale back its support of the United States economy, bailed out of emerging market currencies, with the Malaysian ringgit and Philippine peso both falling to levels last seen in 2010.
Worst hit on Monday was the Japanese stock market, where the Nikkei 225 sagged 2.5 percent to 15,005.73 points. That extended a slide of 1.9 percent on Friday, and took the index to its lowest close since November. Selling in Europe was more restrained, with the Euro Stoxx 50 index of blue-chip companies in the euro zone barely down in morning trading. But the London benchmark FTSE 100 index slid as Vodafone Group shares tumbled 7 percent after AT&T announced that it would not make an offer for the British cellphone giant.
“We’re clearly favoring the developed world over emerging markets at the moment,” Philippe Gijsels, the head of research at BNP Paribas Fortis Global Markets, said. Investors had become cautious amid signs that some countries, including India, South Africa and Turkey were having trouble.
“But what’s basically happening is that markets were overbought and they’re looking for an excuse to sell,” Mr. Gijsels said. “I don’t think this changes the overall story, I think this will probably create an opportunity to buy.”
Investors in Japan were reacting to the additional concern of a stronger yen, which they fear may eat into earnings of Japanese exporters as it makes goods more expensive for customers overseas and less competitive globally.Investors in Japan were reacting to the additional concern of a stronger yen, which they fear may eat into earnings of Japanese exporters as it makes goods more expensive for customers overseas and less competitive globally.
The Japanese currency, which tends to rise amid times of uncertainty because it is considered a relatively safe asset, has climbed sharply against the American dollar over the past few trading sessions. On Monday, it was trading at about 102.50 per dollar, compared with 104.71 yen per dollar on Thursday morning. Data released on Monday showed that Japan’s trade deficit last year surged to 11.47 trillion yen, a record, as the country stepped up oil and gas purchases after the March 2011 earthquake. The Japanese currency, which tends to rise in times of uncertainty because it is considered a relatively safe asset, has climbed sharply against the American dollar over the past few trading sessions. On Monday, it was trading at about 102.50 yen per dollar, compared with ¥104.71 per dollar on Thursday morning. Data released on Monday showed that Japan’s trade deficit last year surged to ¥11.47 trillion, a record, as the country stepped up oil and gas purchases after the March 2011 earthquake.
The global sell-off started to gather pace on Thursday after weak data from the Chinese manufacturing sector reinforced concerns about the strength of the Chinese economy. Although China is still delivering robust growth — many analysts believe its economy will manage to expand more than 7 percent this year — its expansion is far less energetic than it once was, and is overshadowed by considerable risks and uncertainties as the authorities in Beijing seek to engineer a far-reaching shift in the economy.The global sell-off started to gather pace on Thursday after weak data from the Chinese manufacturing sector reinforced concerns about the strength of the Chinese economy. Although China is still delivering robust growth — many analysts believe its economy will manage to expand more than 7 percent this year — its expansion is far less energetic than it once was, and is overshadowed by considerable risks and uncertainties as the authorities in Beijing seek to engineer a far-reaching shift in the economy.
“Our baseline remains that China can avoid a hard landing, but the risk will remain for the foreseeable future,” analysts at Société Générale wrote in a note on Monday. “Moreover, other emerging economies are likely to see a further slowing of growth momentum, and in some cases painful recession could prove hard to avoid.”“Our baseline remains that China can avoid a hard landing, but the risk will remain for the foreseeable future,” analysts at Société Générale wrote in a note on Monday. “Moreover, other emerging economies are likely to see a further slowing of growth momentum, and in some cases painful recession could prove hard to avoid.”
At the same time, country-specific events in Turkey, Argentina and elsewhere have fanned jitters about emerging markets in general over the past few days. Drawn-out political turmoil in Turkey helped send the Turkish lira to a record low against the dollar last week. In Argentina, the central bank abandoned its support of the peso on Thursday, causing the currency to plunge 16 percent last week. And increasingly violent unrest on the streets of Bangkok has stirred worries about the economy there. The Thai stock market has held up relatively well in recent weeks, but on Monday it dropped nearly 2 percent. At the same time, country-specific events in Turkey, Argentina and elsewhere have fanned jitters about emerging markets in general over the past few days. Drawn-out political turmoil in Turkey helped send the Turkish lira to a record low against the dollar last week. In Argentina, the central bank abandoned its support of the peso on Thursday, causing the currency to plunge 16 percent last week. And increasingly violent unrest on the streets of Bangkok has stirred worries about the economy in Thailand. The Thai stock market has held up relatively well in recent weeks, but on Monday it dropped nearly 2 percent.
All this has coincided with the possibility of a further dialing-back by the Federal Reserve of the bond-buying programs that have helped keep interest rates low worldwide. The prospect of waning monetary stimulus has fanned fears that emerging markets around the world will now see much reduced inflows of cash as a result.All this has coincided with the possibility of a further dialing-back by the Federal Reserve of the bond-buying programs that have helped keep interest rates low worldwide. The prospect of waning monetary stimulus has fanned fears that emerging markets around the world will now see much reduced inflows of cash as a result.
In December, the Fed decided to cut back its monthly purchases for the first time, to $75 billion from $85 billion. It is widely expected to reduce the bond purchases by another $10 billion at a two-day policy meeting that ends on Wednesday.In December, the Fed decided to cut back its monthly purchases for the first time, to $75 billion from $85 billion. It is widely expected to reduce the bond purchases by another $10 billion at a two-day policy meeting that ends on Wednesday.
This week, the Fed meeting, earnings from several large American corporations, President Obama’s State of the Union address, several key economic releases, a meeting of European finance ministers and continuing concerns in emerging markets as the Lunar New Year approaches mean that the markets could take cues from any number of fronts, the Société Générale analysts wrote. That could make for a volatile week. The Fed meeting, earnings from several large American corporations, President Obama’s State of the Union address, several key economic releases, a meeting of European finance ministers and continuing concerns in emerging markets as the Lunar New Year approaches mean that the markets could take cues from any number of fronts, the Société Générale analysts wrote. That could make for a volatile week.