Asia Braces for More Stock Market Turbulence
Hong Kong (Aug 24) Investors prepared for another day of selling in risky assets with Asian regulators moving to shore up their equity markets as demand for haven assets swelled.
Futures on American indexes slipped at least 0.7 percent as trading got under way for the week, indicating the rout that sent the Dow Jones Industrial Average into a correction Friday may have further to run. Stocks in New Zealand, the first major market to open in the Asian region, slid the most since 2011, while bonds there advanced with gold. Oil extended its tumble.
“There’s some craziness going on this morning and futures are already showing people are wanting to get out, again,” Chris Weston, chief market strategist at IG Ltd. in Melbourne, said by phone. “You’ve got to be a very brave man or woman to be buying dips in these markets. Catching the proverbial knife comes into play at the moment.”
Taiwan curbed short selling of borrowed stocks at the weekend, while China allowed pension funds to buy shares for the first time as policy makers seek to stymie a selloff that saw equities from Hong Kong to Indonesia enter bear markets on Friday. More than $3 trillion has been wiped from the value of global stocks since China unexpectedly devalued the yuan, igniting a wave of concern over world growth amid angst over U.S. monetary tightening plans and the downward trend in oil.
Standard & Poor’s 500 Index futures fell 0.7 percent to 1,957 by 7:52 a.m. Tokyo time, with contracts on the Dow down 0.8 percent. Nikkei 225 Stock Average futures retreated 0.5 percent in Chicago, after the yen touched a six-week high earlier in the session. The S&P/NZX 50 Index slid 2 percent in Wellington as yields on the country’s 10-year bonds fell a third day. Gold extended gains into a sixth day, while U.S. crude lost 0.4 percent after breaching $40 a barrel last week.
Global stocks slid to their weakest level since October 2014 on Friday as anxiety over emerging-market losses infected U.S. markets and fueled declines in Europe. Junk bond yields jumped to an almost three-year high, while Treasuries posted their best weekly gain in five months as investors favored the safest assets. Ongoing concern over a global glut stoked oil’s retreat, which saw New York-traded oil cap its longest run of weekly declines since 1986.
Asian index futures signaled losses almost across the board, with contracts on Australia’s S&P/ASX 200 Index sliding 2.1 percent in most recent trading, and futures on the Kospi index in Seoul losing 1.8 percent. South Korea’s finance ministry said it will act “pre-emptively” in the market after the country’s largest exchange-traded fund saw the biggest weekly withdrawal since its inception 15 years ago.
Futures on Hong Kong’s Hang Seng Index sank 2 percent after the gauge’s 1.5 percent slump on Friday left it down 21 percent from its April peak, the common definition of a bear market. Contracts on the Hang Seng China Enterprises Index, which tracks mainland Chinese shares listed in the city, fell 1.7 percent in recent trade, after the index sank 7.8 percent last week, its worst weekly performance since September 2011.
FTSE China A50 Index futures were down 0.9 percent in Singapore, and contracts on the Shanghai Shenzhen CSI 300 Index tumbled 3.3 percent. Futures on Taiwan’s Taiex index tumbled 2.9 percent on Friday. Indonesian and Indian index futures declined at least 1.2 percent.
Anxiety over China’s faltering economy has fueled ructions in global markets a number of times this year, with a rout in the nation’s equities sparking declines from Asia to the U.S. last month. The Shanghai Composite Index appeared to resume that downward trend last week, sliding more than 11 percent for its worst slump since the start of July.
China’s securities regulator also said over the weekend that it will penalize major shareholders in publicly traded companies for violating rules limiting stake sales. Major investors at 20 companies constitute the list of offenders, according to a statement from the body. It wasn’t specified what the penalties would be.
Saudi Arabia’s Tadawul All Share Index joined some Asian benchmarks in a bear market Sunday, capping a more than 20 percent slide from its 2015 high reached in April. Dubai’s DFM General Index saw its steepest drop of the year, while Egypt’s EGX 30 Index sank the most since November 2012, signaling more
Commodities looked to be heading for a declining day, with West Texas Intermediate crude dropping to $40.27 a barrel. Futures slid to as low as $39.86 on Friday, the first time WTI has fallen below the $40 mark since 2009. Brent oil lost 0.2 percent to $45.38 a barrel on Monday.
Copper futures due in December sank 0.8 percent on the Comex, falling to $2.2830 a pound after last week’s 2.3 percent drop. The Bloomberg Commodity Index lost 2.8 percent last week in its seventh straight decline, as coffee to industrial metals and livestock dominated declines.
Gold for immediate delivery added 0.3 percent to $1,164.22
New Zealand government bonds rose in Monday trading, bolstered by last week’s gains in Treasuries. Yields on 10-year New Zealand debt fell four basis points, or 0.04 percentage point, to 3.18 percent in a third day of declines. Similar maturity Treasury yields shed 16 basis points last week, to 2.04 percent, their lowest close since April.
In the currency markets, the yen was up 0.3 percent in a fourth day of gains, trading at 121.63 per dollar. Australia’s dollar weakened at least 0.5 percent with its New Zealand’s counterpart. Both countries rely heavily on the commodities trade and on exporting goods to China. The yuan was little
Equity-market volatility surged in the U.S. Friday as the Standard & Poor’s 500 Index slid 3.2 percent to cap its worst week since September 2011. The index is down more than 7 percent from a record after sinking below a trading range that has supported it for most of the year. The Dow fell more than 500 points, and is down 10 percent from its record high reached in May.
Before last week, U.S. stocks had held their ground throughout 2015. The S&P 500 had stayed within a range roughly tracking its 50-, 100- and 200-day moving averages, boosted by signs the U.S. economy is recovering and support from central banks. The benchmark index hadn’t had a decline of more than 5 percent all year.