HONG KONG: Asian markets suffered a sell-off on Thursday, following heavy losses on Wall Street, after the Federal Reserve indicated that it would start easing back on its multibillion-dollar stimulus drive this year.
Adding to selling pressure was preliminary data on Chinese manufacturing from HSBC, which showed activity contracted again in June and was at a nine-month low.
Tokyo shed 1.74 percent, or 230.64 points, to end at 13,014.58, Seoul tumbled 2 percent, or 37.82 points to close at 1,850.49, and Sydney sank 2.12 percent, or 103.0 points, to 4,758.4.
In the afternoon, Hong Kong was 2.62 percent lower and Shanghai gave up 2.18 percent as dealers digested the manufacturing figures. The Fed’s policy-making committee said on Wednesday that the economy continued to grow at a “moderate” pace, but would maintain its $85-billion-a-month bond-buying program, citing high unemployment and the negative impact of government spending cuts.
However, Federal Reserve Chairman Ben Bernanke said afterwards “the committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year” if the economic outlook continues to improve.
Stressing that “our purchases are tied to what happens in the economy,” he said that most members of the committee foresaw tapering in the coming months.
The announcement sent US stocks tumbling—the Dow fell 1.35 percent, the Standard and Poor’s 500 lost 1.39 percent and the Nasdaq tumbled 1.12 percent—while the yield on US Treasuries jumped.
“The Fed’s result was not out of line with expectations,” said SMBC Nikko Securities general manager of equities Hiroichi Nishi.
“Some transparency as to the possible end of US easing is the biggest takeaway. Players can now factor this into investment strategies. Wall Street’s fall will act as a short-term negative against the larger beneficial effect of a weaker yen,” he added.
Global markets have been sent into turmoil in recent weeks as dealers priced in a possible end to the bond-buying, known as quantitative easing.
The program had helped fuel a rally in equities since the Fed said in September that it would provide vast sums of cash until the world’s biggest economy showed signs it was back up to strength.
Numerous data out of the United States in the past months have pointed to a healthy
In China, British banking giant HSBC said that its preliminary purchasing managers’ index (PMI) came in at 48.3, worse than May’s final reading of 49.2 and its lowest since September.
A reading below 50 indicates contraction, while anything above signals expansion.
The news adds to growing concerns about the strength of the world’s number two economy, which is a major driver of growth for the region. Zhang Zhiwei, economist at Nomura International in Hong Kong, said in a report that, “the fall reinforces our concerns over the downside risks to the economy.”