Hong Kongt: Fears of steep losses at corporate bellwethers from Citigroup Inc. to Sony Corp. hit Asian shares on Tuesday, signalling the extent of the global economic slowdown and bolstering less risky assets such as government debt.
The euro slumped to a one-month low against the dollar and the yen as the European Central Bank (ECB) looks set to cut interest rates this week in response to slowing growth, while crude oil continued its slump on fears about reduced energy demand.
Increasing losses: A passer-by is reflected in the display board of the Tokyo Stock Exchange. The bourse’s Nikkei index fell 4.8% on Tuesday. Tomohiro Ohsumi / Mint
Still, losses in Asian shares were not as steep as in previous days, and the Export-Import Bank of Korea sold $2 billion (about Rs9,700 crore) in five-year dollar bonds, indicating demand for new issuance in regional credit markets, albeit at a premium.
“Earnings and economic disappointments are the main contributors to the rise in risk aversion, both of which are likely to act as a persistent drag on markets over coming weeks,” analysts at Calyon Credit Agricole, the investment banking unit of Credit Agricole SA, said in a note to clients on Tuesday.
The MSCI index of Asia-Pacific stocks outside Japan fell 1.34%, its fifth consecutive losing session.
After starting the year with gains, the MSCI indicator is now down nearly 3% so far in 2009, dashing initial hopes for a revival of willingness to add risk.
Concerns over big quarterly losses and gloomy business forecasts are now keeping investors on edge. Citigroup could record a fourth quarter operating loss of at least $10 billion, The Wall Street Journal reported on Monday, while US aluminium producer Alcoa Inc. announced a fourth quarter loss.
Asia’s export firms are also hurting as major overseas markets are mired in recession.
Sony may post an operating loss of about $1.1 billion this fiscal year, its first loss in 14 years, while Toshiba Corp. expects a loss of about $2.2 billion, according to Japanese media reports, sending shares in each down nearly 8%.
Japanese exporters are being squeezed not only by slower global demand, but also by the surging yen. The Nikkei fell 4.8%, after being closed on Monday for a public holiday.
Meanwhile, weak economic data continues to depress investors. China’s exports and imports fell in December for the second month in a row, data on Tuesday showed.
Shanghai’s main index fell 2% and Hong Kong fell 2.2%. Shares in Australia lost 0.8%.
Indian shares closed down 0.4%, spooked by a fall in markets in the West and uncertainty over corporate results. But shares in software exporter Infosys Technologies Ltd rose 6.4% after better-than-expected quarterly results.
Easing inflation, largely due to slumping energy prices, is giving central banks room to cut interest rates in response to the economic turmoil.
The ECB is expected to cut interest rates by 50 basis points to 2% on Thursday, according to a Reuters poll. One basis point is one-hundredth of a percentage point.
The euro dropped 0.7% in Asian trade from late Monday New York trade to $1.33, after hitting a one-month low of $1.32 on trading platform EBS.
Against the yen, the euro fell 0.6% in Asia at 118.50 yen (Rs65.18), from a one month low of 118.30 yen.
Negative credit ratings actions are expected given the costly stimulus packages introduced by many world governments at a time when current account balances are already under pressure.
US President-elect Barack Obama on Monday sought the remaining $350 billion of federal financial bailout funds from Congress, as he seeks ammunition to deal with a “still fragile” financial system.
“Concerns about the sustainability of the economic impact from stimulus plans and the growing fiscal burden worldwide are surfacing,” said Masaki Fukui, a senior market economist at Mizuho Corporate Bank in Japan. “The market has become sensitive to bad news such as credit outlook downgrading, especially with many investors now considering where they should be repatriating funds from, instead of investing to.”
Satomi Noguchi in Tokyo contributed to this story.