HONG KONG: Asian stocks recovered on Wednesday from a mass sell-off in the previous session and emerging currencies ended a tough quarter on a high, but analysts warned of further volatility ahead.
Mining giant Glencore almost halved Tuesday’s 30 percent losses after it moved to reassure investors its business remains robust, following rumours in financial circles it might soon be delisted as it is buffeted by weak commodity prices and China’s slowdown.
The next focus point is on a speech due to be given by Federal Reserve boss Janet Yellen later in the day, with hopes she will shed more light on the timing for raising US interest rates.
Regional equities and risky assets suffered a sharp reverse Tuesday, tracking a slump in New York and Europe after another batch of disappointing Chinese data fanned fresh fears about the world’s number two economy.
But buying picked up on Wednesday, the last day of a torrid quarter that has seen trillions wiped off global valuations, sparked by Beijing’s shock devaluation of its yuan currency last month. Traders got a mostly positive lead from Wall Street, while the Dow and S&P 500 edged up.
Hong Kong-listed shares of Glencore, which has been hammered by soft resources demand in China that led brokerage Investec to question its future, were the stand-out winner as they rallied after Tuesday’s crash.
The shares finished 15.1 percent higher after the debt-laden Swiss company insisted its business was “operationally and financially robust”.
In Asian trade Wednesday Tokyo surged more than three percent at one point before ending 2.7 percent higher. Sydney jumped 2.10 percent and Seoul, which was closed on Monday and Tuesday for a holiday, ended 1.03 percent higher.
Hong Kong finished up 1.41 percent and Shanghai gained 0.48 percent.
However, Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand, warned clients “the stabilisation in risk sentiment looks relatively tentative to us. We’d be wary of another deterioration in Asia today as funding costs spike in China ahead of a week-long holiday.”
Chinese markets are closed from Thursday for the National Day holiday week.
‘We expect volatility’
The International Monetary Fund warned Tuesday that global markets face a liquidity squeeze after years of low interest rates and monetary easing by the world’s leading central banks — the US, Europe and Japan — that encouraged more risk-taking.
In a semi-annual report on global financial stability the Fund said bond markets could be starved of funds when the Fed eventually raises rates, causing more volatility and undermining financial stability.
It asked whether borrowers, most importantly those in emerging markets, are prepared for higher borrowing costs and for falls in their home currencies.
On forex markets some confidence returned to trading floors as safe-haven assets retreated, with the dollar slipping 1.4 percent against the South Korean won and 0.3 percent against the Indian rupee. The Indonesian rupiah added 0.19 percent against the US unit and Australia’s dollar gained 0.11 percent.
However, the greenback has surged against all currencies in recent months on expectations the Fed will lift borrowing costs by 2016. This has seen dealers withdraw cash back to the United States in search of better and safer returns than in emerging markets.
“It’s hard to see how any Asian currency will post sustained, substantial gains in the fourth quarter, with losses versus the US dollar likely to be the norm,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp.
“We expect volatility to remain elevated as Asian policymakers struggle with regional deceleration in growth, and yet more weeks and months of debate over the Fed policy outlook.”
The chances of a rise were enhanced Tuesday by data showing US consumer confidence grew in September, confounding forecasts for a fall and following August’s strong rebound as the economic recovery picks up.
Eyes are now on Yellen’s speech Wednesday. And on Friday the Labor Department releases its employment data for September, which will give a clearer idea of the strength of the US economy.