HONG KONG (BLOOMBERG) – After a slump in stocks, Asia’s main equity gauge has finally succumbed, entering a bear market overnight. The region’s equities have already lost more than US$4.9 trillion (S$6.77 trillion) in value this year, and Thursday isn’t looking pretty.
The MSCI Asia Pacific Index fell 2.1 per cent at 9.34am in Hong Kong, taking its slide from a January peak to 22 per cent. Japan’s Topix index plunged 2.9 per cent, heading for its lowest close since September 2017, while the Nikkei 225 Stock Average lost 3.5 per cent. The Kospi 100 Index’s 2.6 per cent slide took the South Korean gauge into bear-market territory after data showed the economy grew less than projected in the third quarter. Chinese markets also tanked.
This comes after tech-heavy Nasdaq Composite Index plunged 4.4 per cent for its biggest single-day slide since August 2011 and entered a correction. Both the Dow Jones Industrial Average and S&P 500 Index erased their annual gains, even as the S&P 500 operating income is surging more than twice the historical average.
Volatility is back, and investors are bracing for more. The MSCI Asia Pacific Index has moved an average 0.9 per cent daily in October through Wednesday, the biggest swings since June 2016, data compiled by Bloomberg show. As markets opened on Thursday, the color was red: China’s Shanghai Composite Index lost 2.5 per cent, and Hong Kong’s Hang Seng Index 2.3 per cent. Australia’s S&P/ASX 200 Index also fell more than 2 per cent.
The reasons for the slump in Asia are well known: There’s the US-China trade war, worries about slowing economic and earnings growth, tech shares plunging, and rising rates amid Federal Reserve tightening. But this week, the biggest point of concern for investors including Mr Steven Leung, executive director at UOB Kay Hian (Hong Kong), has been the US dollar, which hit a new high on Wednesday.
“The dollar has been strengthening this year and the pace has accelerated,” said Mr Leung. “Money may continue to go back to the US and make the emerging-markets outflow worse for the rest of this year.”