Fear of war forces Asian markets down, gold and yen hit 5-month highs

Shanghai down 1pc, Shenzhen loses 1.4pc, Taiwan falls 1pc while Tokyo ends down 0.5pc. Gold hits 5-month high of US$1,288.5 per ounce, up 0.8pc

PUBLISHED : Friday, 14 April, 2017, 1:08pm
UPDATED : Friday, 14 April, 2017, 9:59pm

Asian stock markets fell on Friday while the yen and gold hit five-month highs as investor fears grew after the US dropped the largest non-nuclear bomb it’s ever used in combat on Afghanistan on Thursday night.

While most western and Hong Kong markets were closed on Friday for the public Easter holiday and resume only on Tuesday, the Asian markets that remained open reflected the worries about tensions in the Middle East and North Korea.

It will be the “Day of the Sun” holiday on April 15 in North Korea, which commemorates the birth of its founder Kim Il Sung, leading to concerns the country would mark the occasion by holding further missile tests.

US president Donald Trump has vowed to take action to stop North Korea’s nuclear programme unless China manages to constrain its neighbour.

The Shanghai Composite Index dropped 1 per cent to close at 3,246.07, while the CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – dropped 0.8 per cent to 3,486.51. The index this week is down 1.28 per cent against a 2 per cent rise the previous week.

The Shenzhen Composite Index declined 1.4 per cent to 1,986.65 at Friday’s close which was down 2 per cent this week, wiping out almost all of the 2.1 per cent weekly gain the previous week. The Nasdaq style ChiNext lost 1.2 per cent to 1,887.46.

Almost all stock markets in the Asian Pacific region fell on Friday with Tokyo’s Nikkei 225 dropping 0.5 per cent to close at 18,335.63, while Taiwan lost 1 per cent, and South Korea 0.64 per cent.

Gold hit a five-month high of US$1,288.5 per ounce, up 0.8 per cent on Friday and has risen 2 per cent this week as investors worry about the geopolitical tensions.

The Japanese yen, considered another safe haven, also rose to five-month high on Friday to trade at 108.93 yen per US dollar, up 2 per cent this week.

“Chinese and other Asian stock markets faced selling pressure on Friday due to the fear of a war,” said Louis Tse Ming-kwong, managing director of VC Asset Management.

“But I believe the market may have overreacted. The US is still negotiating with China over the North Korea issue. The market is only finding an excuse to sell,” Tse said.

Jasper Lo Cho-yan, chief strategist at King International Financial Holdings, believes gold and the yen will continue to rise in the near future.

“There is a lot political tension. Besides the US and North Korea and the Middle East, France is going to have the presidential election next week,” Lo said.

“This has all led investors to put money into gold and yen to escape risk.”

Some defence stocks gained amid the rising global uncertainties. Shenzhen-listed Addsino was at one point up 1.4 per cent before closing 0.7 per cent higher at 15.37 yuan. Shanghai-listed Aisino rose 0.6 per cent in the morning before closing at 21.48 yuan, up 0.2 per cent.

Finance shares related to Xiongan New Area, a planned new economic zone in northern China, continued to rally based on the likelihood of government policy stimulus measures planned at the site.

Shenzhen-listed Bohai Financial Investment Holding rose 6 per cent in the morning before closing 2.5 per cent higher at 7.89 yuan and Shenzhen-listed HNA Investment Group increased 10 per cent to close at 5.56 yuan.