Hong Kong: Asian stocks fell to a 1-1/2-month low on Friday, weighed by poor corporate results in the technology sector, while the US dollar drifted higher as investors sought refuge from the deteriorating global economy.
Government bond markets were caught in a tug-of-war, with mid-maturities in demand on expectations for more economic pain, while long-dated US Treasuries were sold in anticipation of a flood of new issuance. The five-year Japanese government bond yield plumbed three-year lows.
Oil prices slipped to $43 a barrel as a buildup in US inventories reflected a lack of energy demand from strugging consumers and businesses.
Samsung Electronics chalked up its first ever quarterly loss on Friday, following stark warnings from tech giants like Microsoft, Nokia and Sony, as consumers pull back severely on their spending on gadgets in the face of recessions in Britain, Europe, Japan and the United States.
The MSCI index of Asia-Pacific stocks outside Japan fell 1.4% to the lowest since 8 December.
Japan’s Nikkei share average was down 2.6% after earlier in the session hitting a two-month low. Shares of Sony Corp dropped 6% after saying on Thursday it would post a record $2.9 billion loss.
“With Sony the way it is, it’s easy to imagine how other electronics makers are faring. On top of that, many companies haven’t yet priced in the recent strength in the yen into their earnings forecasts,” said Fumiyuki Nakanishi, manager at SMBC Friend Securities in Tokyo.
Hong Kong’s Hang Seng index was one of the relative outperformers in the region, slipping only 0.9% in early trade. Shares in HSBC stayed just in positive territory, though oil-related shares were a drag.
By and large, fund managers globally remain defensively positioned, with heavy allocations for cash, according to a January survey of money managers conducted by Merrill Lynch. The poll showed a slight trimming in underweight positions in equities, to 28% from 34%, and in overweight bond positions to 11% from 22%.
However, cash is still king. Cash positions in Europe climbed to the highest since 2001, with 42% of respondents there saying they are overweight cash compared with 29% in December.
Investors are talking a more positive story, especially with regards to the US, but the fear factor remains, said Gary Baker, Banc of America Securities-Merrill Lynch Head of EMEA Equity Strategy.
Fear also was driving demand for US dollars. The euro edged up 0.1% to $1.2991 and the dollar was at 89.14 yen, up 0.3% on the day though close to Wednesday’s 13-year low of ¥87.10.
US Treasury Secretary nominee Timothy Geithner said a strong US currency was in the national interest, repeating a mantra held since the Clinton administration in the 1990s and giving investors a sense of stability.
In the bond market, the five-year Japanese government bond yield slipped 1 basis point to 0.665%, its lowest since September 2005 after the central bank said the economy would likely shrink in the next two fiscal years and anticipated a period of falling prices.
Longer-dated US Treasuries have been sliding on growing fears that a rising tide of government debt issuance could swamp the market. The yield on the benchmark 10-year note, which moves in the opposite direction of the price, was currently stable at 2.605%.