Asia - Asian stock markets dive on Japan, US concerns

Asian stock markets were belted yesterday as the strengthening yen and worries over United States monetary policies sparked a stampede for the exit.

The bloodshed was most apparent in Tokyo, but that will be of little consolation to Singapore investors, who have seen S$72 billion (US$58 billion) wiped off the value of local shares in just three harrowing weeks.

The Straits Times Index (STI) was down by as much as 58.62 points, or 1.86 per cent, at one stage before paring losses to close 22.79 points down at 3,130.69.

That is a painful fall of 9.37 per cent from the six-year high it hit just three weeks ago on May 22.

Tokyo was the big loser, with the Nikkei-225 diving 6.35 per cent, taking its drop from May 22 to 20.36 per cent, a loss that puts it in bear market territory.

The Philippine market plunged 6.75 per cent, Hong Kong's Hang Seng Index fell 2.19 per cent, China's Shanghai Composite Index lost 2.74 per cent and Bangkok's SET Index slipped 2.4 per cent.

Even European markets were dragged lower by the Asian sell-off, with Frankfurt's Dax falling 1.5 per cent and London's FTSE down 1 per cent in early trade.

Selldowns over recent weeks have left traders on a hair trigger, so developments over recent days were enough to ignite the panic.

There was widespread disappointment on Tuesday when the Bank of Japan (BOJ) said it would hold back on further money-printing stimulus measures.

Traders are also fearful that the US central bank's interest-rate fixing meeting next week might confirm talk that the policy of injecting US$85 billion of fresh money into the market each month will be scaled back.

To add to the anxiety, the US dollar fell almost two yen, or 2.4 per cent, to a two-month low of 94.3 yen, sparking fears that Japanese exporters would be hurt as Japanese Premier Shinzo Abe's efforts to depress the yen unravel.

"It is a combination of (US Federal Reserve chief Ben) Bernanke and the BOJ that triggered this turmoil, magnifying the moves of positions that needed to be sorted out," Tetsuro Ii, chief executive of Common Assets Management, told Reuters.

Despite yesterday's blood-letting, some big fund managers are taking things in their stride.

Singapore-based Hugh Young, managing director of Aberdeen Asset Management Asia, said: "Stocks have gone up unreasonably fast, and there is obviously a disconnect between the real world and financial asset prices. This pullback is a good thing."

Market strategists advise investors to stay on the sidelines. CIMB research head Kenneth Ng said: "We think it is still too early to bottom-pick. We will be fully invested if the STI falls below 2,800."

Goh Eng Yeow

The Straits Times

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