Hong Kong: Asian shares fell sharply on Thursday after weak US economic data rekindled investor worries about growth, while hedge funds sold risky assets, lifting the yen and supporting the dollar.
European stock index futures pointed to a lower open, adding to the previous session’s sell-off and mirroring the sharp drop on Wall Street.
Asian investors were unnerved by a surprise drop in US home sales last month, which followed a decline in consumer confidence, highlighting risks to a recovery in the world’s biggest economy.
The MSCI index of Asia Pacific stocks traded outside Japan slid 2.4% while the Thomson Reuters index of regional shares was down 1.4%, marking a third session of losses.
“Everybody’s been calling for a correction but I think the speed and volume of what we’re seeing has caught the market by surprise,” said Ben Potter, a research analyst at IG Markets in Australia, where shares tumbled 2.4%.
“There has been a big change in underlying sentiment which has triggered faint alarm bells.”
High-yielding Australian and New Zealand currencies fell to three-week lows and Indonesia’s central bank was seen in the market for a second day to support the rupiah.
Currency traders said hedge funds, whose flight from risky assets had aggravated a sell-off in Latin American markets on Wednesday, were seen taking profits on Asian investments ahead of their business year-end in November.
Short-term speculators were also pocketing gains. However, losses were restrained compared with Wednesday’s 5% slump in the MSCI’s Latin American stock index.
The New Zealand dollar came under additional pressure after the central bank vowed to maintain record-low rates until at least July 2010. The Australian dollar -- which has climbed about 40% against the dollar since March -- hit $0.8942 at one point, its lowest point in three weeks, while the rupiah hit a one-month low at 9,700 to the dollar. It is still Asia’s best performing currency this year, up 13%.
The yen’s strength added pressure on shares of exporters in Japan, driving the Nikkei index down 1.8% and below the 10,000 points mark for the first time in three weeks.
The yen rose to as high as 90.25 to the dollar from 90.78 on Wednesday, when it gained more than 1%, while the dollar was steady against a basket of currencies near its highest in more than two weeks.
Foreign investors were pulling out of South Korea’s stock market, which saw the biggest net selling by foreigners this year as the benchmark Kospi index fell 1.5%.
Asian stocks have been among the strongest performers this year though and each pullback has been taken as buying opportunity to play the Asia growth story.
Disappointing US home sales data on Wednesday overshadowed news that US durable goods orders rose for the second time in three months and raised fears that US third-quarter gross domestic product, due out later on Thursday, would fall short of forecasts for 3.3% annualised growth.
Receding rate rise expectations in New Zealand heaped pressure on the Kiwi dollar, which fell as far as $0.7163, its lowest level in more than three weeks, after the central bank kept interest rates on hold and said it expected them to remain at a record low until July at least.
While Norway followed Australia and raised interest rates on Wednesday as its economy recovers from the global downturn, New Zealand central bank governor Alan Bollard was notably cautious about the global outlook on Thursday.
“There remain significant vulnerabilities and challenges to be worked through in many economies,” Bollard said in a statement. “This process could weigh on global growth going forward.”
Australian banks have also been surprisingly cautious this week, despite being far less affected by the crisis than their US and European peers.
Mike Smith, chief executive of Australia and New Zealand Banking Group said on Thursday the financial crisis was only just beginning to play out and economies were fragile.
“This isn’t over yet,” Smith said. “Often it’s the aftershocks that do the most damage.”
The bank reported a strong recovery in second-half profits but its cautious outlook helped its shares lose 2%.
Resources stocks were hit by falling commodity prices with Australian mining giant Rio Tinto sliding 4.9%.
Australian bond futures rallied on safe-haven inflows and as investors pared bets for a sharp rate rise next week. Three-year bond futures were 0.160 points higher at 94.81.
The oil price was down 0.2% at $77.22 a barrel after losing $2.09 on Wednesday.
In Hong Kong, shares in PetroChina slid 4.8% by lunchtime after disappointing third-quarter results from the world’s second-most valuable oil and gas producer.
Japan Airlines bucked the slide in Japanese shares, rising 2.7% ahead of an announcement by the government on a plan to restructure the struggling carrier.
Japanese electronics giant NEC Electronics Corp tumbled 8.3% after reporting on Wednesday a far bigger quarterly loss than a year ago.