Asian markets extend rout as volatility returns

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HONG KONG: Asian stock markets took another battering on Wednesday, with Tokyo leading a day of sharp losses as investors grow increasingly concerned about the world economy and the possibility of a global recession.

More bourses reopened after the Lunar New Year break but immediately plunged into the red, playing catch-up with a rout that has seen billions wiped off valuations from Sydney to Frankfurt to New York this year.

Energy firms were once again in the firing line after oil prices sank below $28 a barrel Tuesday, while financial plays are also coming under increasing pressure as investors fret about their bottom lines in the face of the economic slowdown.

The sell-off is the latest in the past six weeks that has seen severe volatility around the world, fuelled by China’s growth slowdown and a crash in crude prices.


The Chicago Board Options Exchange Volatility Index, which measures market turbulence, is sitting around five-month highs and has jumped 20 percent since Friday.

“Contributing to the drop in oil and certainly having a large impact on the drop in equities is this growing concern about the sustainability of the recovery, the state of economic growth in China and increasingly the state of growth in the US,” Russ Koesterich, global chief investment strategist for New York-based BlackRock, told Bloomberg TV.

“People are getting worried about the global recession, worried about growth, which is affecting not only oil and stocks but other risky assets as well.”

Japan’s Nikkei index lost 2.3 percent to close at its lowest level since October 2014, extending the 5.4 percent collapse Tuesday as the yen climbed against the dollar.

Sydney shed 1.2 percent. Singapore, returning from a two-day holiday, sank 2.1 percent in the afternoon while Wellington, Manila and Mumbai also lost out.

Energy, financial firms hit
Among energy plays Sydney-listed Woodside shed almost 1 percent and miner BHP Billiton was 2.5 percent off. In Tokyo JX Holdings was more than 2 percent off and Inpex eased 2.8 percent.

Crude continues to be buffeted by the global supply glut, overproduction and weak demand that has sent oil prices crashing more than 70 percent from mid-2014 highs.

On Tuesday US benchmark West Texas Intermediate slumped almost 6 percent and Brent lost 7.7 percent after the International Energy Agency warned there was unlikely to be any easing of fundamentals.

Bargain buying helped both contracts climb 1.5 percent in the afternoon Wednesday.
Investors are now awaiting the release later Wednesday of the weekly US stockpiles report as they seek clues to demand in the world’s top economy and oil consumer.

Asia’s banks were also taking a beating following big losses in their European counterparts as economic fears continue to bite.

Japanese giant Sumitomo Mitsui lost more than 5 percent and Mitsubishi UFJ lost 7 percent. In Singapore UOB lost 1.9 percent in late trade while Sydney-listed ANZ was 1.6 percent off and Westpac gave up 0.6 percent.

Investors are keeping a close eye on Federal Reserve chief Janet Yellen’s congressional testimony later in the day to see what signals she gives on interest rates. There are hopes she will sound a cautious note after the turmoil that has ravaged markets this year.

AFP

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