BackAsian markets slump on fears over US Fed stimulus
Nikkei loses more than 6%, dollar hit 10-week low against yen on expectations that Fed’s monetary easing measures will end soon
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Hong Kong: Asian markets dived on Thursday, with Tokyo’s Nikkei losing more than 6%, while the dollar hit 10-week lows against the yen on expectations that central banks’ monetary easing measures will end soon.
Dealers in emerging economies also ran for cover, with the US Federal Reserve in focus amid fears it will soon start to reel in its $85-billion-a-month bond-buying.
Tokyo’s Nikkei crumbled, losing 6.35%, or 843.94 points, to 12,445.38 as dealers were spooked by a slumping dollar. The index has lost 20% since hitting its peak last month, putting it in a bear market.
Hong Kong shed 2.67% in the afternoon and Sydney ended 0.61% lower, giving up 28.7 points to end at a five-month low of 4,695.8. Seoul skidded 1.42%, or 27.18 points, to finish at 1,882.73.
Shanghai tumbled 3.07% in its first session since weak trade and investment data at the weekend reinforced fears about a slowdown in the world’s number two economy. Chinese markets were closed for three days for a public holiday.
In emerging economies foreigners removed cash they had invested on the back of the Fed’s money-printing splurge as they sought better returns than in the West.
Manila, which last month sat at record highs, dived 5.63%, Bangkok tumbled 5.52% and Jakarta was 1.70% lower.
Sentiment has been battered this week after Japan’s central bank held off unveiling any new monetary easing measures.
The resulting plunge in Japanese stocks indicates cracks could be starting to appear in the market’s faith in Prime Minister Shinzo Abe’s big-spending plan to lift the troubled economy.
It also reignited traders’ fears, which have been growing for several weeks, about the so-called quantitative easing by the Fed as the US economy shows signs of improving.
Fed chief Ben Bernanke unveiled the scheme in September, saying the bank would continue to print money until the world’s biggest economy was strong enough to stand on its own two feet.
Japanese stocks took the brunt of Thursday’s hammering as the yen extended its gains against the dollar.
“There is no clear downside target (for the Nikkei) unless there is more clarity of the Fed’s policy," said Shigeo Sugawara, senior investment manager at Sompo Japan Nipponkoa Asset Management. “Depending on the comments from the Fed, the direction may become clearer," Sugawara told Dow Jones Newswires.
In Tokyo forex business the dollar was at ¥94.00 — lows last seen in early April when the BoJ unleashed its massive spending plan to kickstart the economy. That compared with ¥95.88 in New York late Wednesday and the high ¥98 range in Tokyo at the start of the week.
The greenback has dived around 9.0% since its spike late in May.
“The Nikkei falls because the dollar/yen falls, then the dollar/yen falls further because the Nikkei has fallen — markets are in this vicious circle," said Atsushi Hirano, head of FX sales Japan at Royal Bank of Scotland.
The euro was at $1.3385 compared with $1.3335 in New York, while it bought ¥125.81, from 127.86.
On Wall Street the Dow fell 0.84%, the S&P 500 also slid 0.84% and the Nasdaq was down 1.06%.
“We have seen such wild fluctuations lately that few investors want to press on with buying," said Hirokazu Kabeya, senior strategist at Daiwa Securities.
“It’s a kind of a chicken-and-egg situation — volatile markets keep buyers away and the absence of buyers leads to market volatility. We are trapped in a negative spiral right now."
Oil prices were lower, with New York’s main contract, light sweet crude for delivery in July, dropping 56 cents to $95.32 a barrel and Brent North Sea crude for July down 38 cents at $103.11.
Gold was at $1,390.57 at 0630 GMT from $1,377.00 late Wednesday. AFP
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