Asian markets dived Thursday, with Tokyo’s Nikkei losing more than six per cent, while the dollar hit 10-week lows against the yen on expectations that central banks’ monetary easing measures will end soon.
Dealers in emerging economies also ran for cover, with the US Federal Reserve in focus amid fears it will soon start to reel in its US$85-billion (HK$660-billion)-a-month bond-buying.
Tokyo’s Nikkei crumbled, losing 6.35 per cent, or 843.94 points, to 12,445.38 as dealers were spooked by a slumping dollar. The index has lost 20 per cent since hitting its peak last month, putting it in a bear market.
Hong Kong shed 2.19 per cent, or 467.62 points, to end at 20,887.04 while Sydney ended 0.61 per cent lower, giving up 28.7 points to end at a five-month low of 4,695.8.
Seoul skidded 1.42 per cent, or 27.18 points, to finish at 1,882.73.
Shanghai tumbled 2.83 per cent, or 62.54 points, to 2,148.36 in its first session since weak trade and investment data at the weekend reinforced fears about a slowdown in the world’s number two economy. Chinese markets were closed for three days for a public holiday.
In emerging economies foreigners removed cash they had invested on the back of the Fed’s money-printing splurge as they sought better returns than in the West.
Manila, which last month sat at record highs, dived 6.75 per cent, or 442.57 points, to end at 6,114.08, while in late trade Bangkok tumbled 3.83 per cent and Jakarta was 1.40 per cent down.
Sentiment has been battered this week after Japan’s central bank held off unveiling any new monetary easing measures.
The resulting plunge in Japanese stocks indicates cracks could be starting to appear in the market’s faith in Prime Minister Shinzo Abe’s big-spending plan to lift the troubled economy.
It also reignited traders’ fears, which have been growing for several weeks, about the so-called quantitative easing by the Fed as the US economy shows signs of improving.
Fed chief Ben Bernanke unveiled the scheme in September, saying the bank would continue to print money until the world’s biggest economy was strong enough to stand on its own two feet.
Japanese stocks took the brunt of Thursday’s hammering as the yen extended its gains against the dollar.
“The long-talked about issue of what happens when the Fed tapers QE (quantitative easing) does seem to be being priced into stocks right now,” Mike McCudden, head of derivatives at Interactive Investor.
“And given the boost lax monetary policy has given markets this year then there’s plenty more room on the downside,” he told Dow Jones Newswires.
In Tokyo forex business the dollar was at 94.10 yen -- lows last seen in early April when the BoJ unleashed its massive spending plan to kick-start the economy. That compared with 95.88 yen in New York late Wednesday and the high 98 yen range in Tokyo at the start of the week.
The greenback has dived around 9.5 per cent since its spike late in May.
“The Nikkei falls because the dollar/yen falls, then the dollar/yen falls further because the Nikkei has fallen -- markets are in this vicious circle,” said Atsushi Hirano, head of FX sales Japan at Royal Bank of Scotland.
The euro was at $1.3342 compared with $1.3335 in New York, while it bought 125.55 yen, from 127.86 yen.
On Wall Street the Dow fell 0.84 per cent, the S&P 500 also slid 0.84 per cent and the Nasdaq was down 1.06 per cent.
“We have seen such wild fluctuations lately that few investors want to press on with buying,” said Hirokazu Kabeya, senior strategist at Daiwa Securities.
“It’s a kind of a chicken-and-egg situation - volatile markets keep buyers away and the absence of buyers leads to market volatility. We are trapped in a negative spiral right now.”
Oil prices were lower, with New York’s main contract, light sweet crude for delivery in July, dropping 78 cents to $95.10 a barrel and Brent North Sea crude for July down 49 cents at $102.90.
Gold was at $1,385.80 at 0810 GMT from $1,377.00 late on Wednesday.
In other markets, Taipei fell 2.03 per cent, or 164.49 points, to 7,951.66.
Taiwan Semiconductor Manufacturing Co. shed 3.24 per cent to Tw$104.5 while Hon Hai Precision dropped 2.13 per cent to Tw$73.4.
Wellington fell 0.91 per cent, or 40.22 points, to 4,401.91.
Telecom closed down 3.6 per cent at NZ$2.16 and Hallenstein Glasson lost 7.0 per cent to end at NZ$4.95.