Japan stock market rout shows no let-up by close as Singapore equities slide; Hong Kong poised to trade lower Thursday

Markets eye Janet Yellen testimony later on Wednesday for direction

PUBLISHED : Wednesday, 10 February, 2016, 12:41pm
UPDATED : Wednesday, 10 February, 2016, 5:44pm

Asian stock markets swooned by the close on Wednesday in volatile global dealings with Japan’s benchmark index plunging to a 15-month low and analysts predicting pain for Hong Kong and other Asian markets when they come back on Thursday after the Lunar New Year holidays.

In Japan, the Nikkei 225 closed 2.31 per cent or 372.05 points lower at 15,713.39, breaking the 16,000 level for the first time since the end of October 2014. The drop follows a 5.4 per cent fall seen on Tuesday, which represented the most severe one-day fall since May 23, 2013 when it fell by 7.32 per cent.

Singapore’s Strait Times index finished 1.57 per cent or 41.11 points lower at 2,582.10. Markets in mainland China and Taiwan are closed for the week for Lunar New Year, while South Korea and Hong Kong markets will resume trading on Thursday.

“We can see that investors are in a panic,” said Patrick Yiu Ho-yin, managing director of CASH Asset Management.

The crash in the Japanese market can be attributed to a strengthening yen, which is expected to hurt exports and was caused by investors reversing their short-selling positions to buy back the currency at a higher price.

Both Japan and Singapore shares also tracked overnight losses in the US market, which took a hit amid growing concerns over global growth and a lack of clear direction from the US Federal Reserve whether it would raise interest rates in the coming months.

Although Asia markets may see support soon, they are expected to remain bearish in the long run as oil prices fail to rebound, investors fret over global growth and China’s slowing economy.

“The (fall) in Singapore is already quite reasonable given the weakness in the US and Europe,” said Alex Wong Kwok-ying, asset management director of Ample Capital. “The problems remain the same and I don’t think we will see a solution soon. Even if the Fed tries to put some stimulus into the market, the impact may be minimal.”

Hong Kong stocks are expected to open lower Thursday, with HSBC and Tencent likely leading the losses, Wong said. HSBC will be hit by the fall in European banks and concern over exposure to energy companies, while Tencent will follow the decline in global technology stocks following strong selling in the Nasdaq market.

All eyes will be on US Fed Chair Janet Yellen’s testimony to the US House Financial Services committee later on Wednesday for signals on the course of US monetary policy.

“The best that can be hoped for is an acknowledgement that things have changed fairly dramatically since the Fed increased rates less than two months ago and that she concurs with the market pricing that suggests the first half of this year is not the time to be increasing rates,” said Simon Smith, chief economist at FxPro, in a note.

European banks led a global sell-off in financial stocks Monday as signs of stress in the sector mounted, triggering sharp selling in the beaten-down Japanese banking sector which has been under pressure from the Bank of Japan’s unexpected negative interest rate policy last month.

The BOJ’s move was an attempt to stimulate Japan’s economy and bring inflation back to a target 2 per cent, said Li Kwok-suen, fund manager at Phillip Capital Management Hong Kong. The policy cushioned the market briefly before it reversed lower.