Tokyo: Asian investors sweated Thursday as the aftershocks from the recent global stock market rout reverberated around the region, pushing Tokyo and Shanghai back into negative territory.
Markets waited nervously to see if selling pressure would ease — as many analysts predict — or whether the recent signs of stabilisation in many markets are merely the eye of the storm before a further selloff.
Analysts have been quick to point out that the Asian economies remain in good shape, but after the sharp falls of recent days nerves were still frayed.
After clawing back some of their massive losses on Wednesday, Chinese share prices turned lower again, falling 2.84% in morning trade as the rollercoaster ride continued following Tuesday’s worst selloff for a decade.
Dealers said investors remained jittery despite a turnaround of nearly 4% Wednesday and volatility was expected to continue given the Chinese market was up more nearly 130% over the last 12 months.
“Investors are still wondering if the storm is actually over or not,” said Masatoshi Sato, a senior strategist at Mizuho Investors Securities in Tokyo.
“Aftershocks in some markets, where prices are overvalued, may be seen from now on. Volatile and sensitive trading is likely to continue at least until mid-March,” he said.
In Tokyo the benchmark Nikkei-225 index was down 1.15% by lunch as investors drew little comfort from a modest rebound overnight on Wall Street.
Wall Street shares clawed back some lost ground Wednesday, ending higher a day after a global rout unleashed the worst one-day drop in US stocks since the aftermath of the 11 September 2001 terrorist attacks.
The Nikkei index slumped 2.85% on Wednesday. At one point, the key index was down more than 700 points, a bigger daily loss than the one sustained following the 11 September attacks.
Despite the fresh losses, many market watchers remained optimistic that the worst of the recent rout would soon be over.
“The impact of the global stock slump is expected to wane soon as a lot of players still bet that this is a temporary phenomenon,” said Kenichi Azuma, a senior broker at Cosmo Securities.
“Investors are taking their time to consider which shares they should buy back at the bottom,” he added.
In Hong Kong share prices opened 0.36% lower on Thursday after two days of sharp falls prompted by global sell-offs.
Barclays Wealth Asia Strategist Philip Niem said the recent selloff appeared to reflect deeper concerns than just the tumble in Chinese shares.
He said investors may be worried about the risk of earnings disappointment this year across the world due to rising interest rates and commodity prices.
“The correction is likely to find a bottom during March, however the cloud of possible earnings disappointment should keep the recovery more muted than the strong bull market enjoyed in the second half of 2006,” he predicted.
Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities, agreed that the Shanghai plunge alone could not explain the recent global rout.
“Investors had held optimistic views about the outlook for the US economy, but they began to doubt these views in the light of recent tame economic data, including housing market figures,” he added.
The dollar gained to 118.73 yen in Tokyo morning trade from 118.49 yen late Wednesday in New York after US Federal Reserve chairman Ben Bernanke said his economic outlook was unchanged after a tumbles on global stock markets.
The euro edged down to $1.3229 from $1.3231.