Hong Kong: Asian stocks slumped on Friday to their lowest since early December, led by big losses in South Korea, as fears about the global economy and the financial sector led investors to shed riskier assets.
In a tough week for global markets, the MSCI index of Asia-Pacific stocks outside Japan is headed for an 8% slump for the week - its worst since a 10% weekly drop in late November when the gauge touched five-year lows.
The sell-off in US markets overnight following weak US employment data and fears of nationalisation of US banks spread into Asia, with European shares also set to track these losses, as investors shift to safer assets such as US Treasuries and the dollar.
The tough markets indicate that a deluge of rescue packages - with measures ranging from increased spending in the United States to the outright buying of corporate debt in Japan - has yet to win over investors.
The MSCI index of regional stocks outside Japan slumped 2.9% as of 12:35pm, after earlier hitting its lowest level since 2 December. The gauge is not far off from a low of 194.03 hit in late November.
The latest fall comes after data on Thursday showed US workers drawing unemployment aid jumped to a record at nearly 5 million, suggesting the 13-month-old US recession is deepening.
In another bad omen for Asian exporters that depend on the recovery of the world’s largest economy, US lender stocks hit 17-year lows on fears they would be nationalised, reflecting concerns about the stability of the financial sector.
Other sources of concerns abound. Japan’s central bank said on Friday a deterioration in corporate profits had gathered pace, while investors also fret about the economic gloom gripping cash-strapped eastern Europe.
South Korea, another country that has been hit hard by the crisis, on Friday saw its main KOSPI index slump 3.7%, to its lowest close in more than two month, while the won currency slid for a ninth consecutive session on fears domestic banks will struggle to access overseas capital markets.
Japan’s Nikkei average fell 1.9% to its lowest close since 27 October, while the broad-based Topix index slumped 12 points to its lowest close since January 1984.
Among steep decliners were financials such as South Korea’s Shinhan Financial Group. Exporters also fell, with Japan’s tyre maker Bridgestone Corp sliding 7.4% a day after forecasting a bigger-than-expected slide in profits this year
Other Major Asian index in Australia, Hong Kong, Taiwan, India, and Singapore slid 1-3% each.
Emerging market woesInvestors sought to avoid the volatility by targeting assets often prized for their liquidity and safety.
US Treasuries gained during Asian trade, though inflows were limited by caution given a record $94 billion in US government debt will be sold next week. Benchmark 10-year notes rose 11/32 in price to yield 2.811%, down about 4 basis points from late US trade the previous day.
The dollar jumped 1.6% to 1,504.9 won, bringing the South Korean currency to its lowest closing level since 24 November and within sight of an 11-year low.
The dollar was broadly resilient against other currencies, benefitting from a rush to liquidity. The euro fell about 0.6% to $1.2580, though that was well off a three-month low around $1.2510 reached on Wednesday.
Caution was also a key factor in the commodities market.