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WORLD> Asia-Pacific
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Deep recession fears thrash Asia stocks
(Agencies)
Updated: 2008-10-16 15:07 HONG KONG - Asian stocks plummeted, led by an 11 percent drop on Japan's Nikkei, and oil prices dropped to a one-year low on Thursday as fears grew of a more protracted and sharp global slowdown than initially expected.
Major European stock markets were expected to open down as much as 5.9 percent, according to financial bookmakers, as investors anticipated poor corporate results in such an uncertain economic environment, while the dollar gained in a flight from risk. Optimism about the stabilization in money markets has been swept aside and widespread selling of global equities has resumed in earnest as the quarterly results season gets underway and reports trickle in about sharp losses at hedge funds. "I think today there is just a combination of uncertainty and deleveraging in the market," said Amar Gill, head of thematic research at CLSA in Singapore. "International funds are pulling back and putting their money into whatever is safest: Treasuries or cash or paying off existing debt," he said. Market ructions as investors flee from almost any form of risk has weighed on the global economic outlook, which has fed back into markets in a damaging circle. The Nikkei share average plunged 11.4 percent, the largest single-day decline since the 1987 stock market crash. The president of Toyota Motor Corp on Wednesday said the business environment has deteriorated beyond earlier expectations and predicted the key North American car market would remain sluggish through next year. The MSCI index of Asia-Pacific shares outside of Japan fell 7.8 percent, locked in a downtrend that had brought it to a near 4-year low last week and erased more than $1.5 trillion in market value. The index is down by half so far this year. Hong Kong's Hang Seng index fell 7.6 percent, with the biggest losses racked up by commodity-related companies, such as Shenhua, China's top coal producer. South Korean stocks had their third biggest fall ever, down 9.4 percent and the won dived 9.7 percent, its biggest fall since 1997. Some investors were trying to find value amid the selling. Marino Valensise, chief investment officer of Baring Asset Management, said he has been adding to exposure to equities and is looking to add more. In particular, Valensise said he likes prospects for Chinese stocks because of the country's relatively solid growth and the fact that many Chinese stocks were the first to enter a sharp, sustained downturn, so they will be the first to emerge. "We have adds equity exposure and we are looking to add more," Valensise said at a news conference. "We like China and we will act accordingly." NOTHING NICE TO SAY Overnight US stock markets slid across the board, with the S&P 500 index dropping 9 percent after a report showed US retail sales dropped the most in more than three years. "Bottom line, there is little positive to say about this market. The equity markets are impacted by the lack of liquidity in financial assets, terribly oversold conditions as well as unknown visibility on the macro economy," said Thomas Lee, chief US equity strategist with JPMorgan, in a note. Despite mixed messages from the Federal Reserve on the near-term outlook for interest rates, the futures market reflects a 50/50 chance the benchmark US interest rate could drop to 1 percent this month from 1.50 percent. Even the most deft investors have been flipped by the ferocity of selling and risk reduction in markets. Citadel Investment Group, one of the world's largest hedge funds, said September was the single worst month in the history of the company and warned of more volatility in weeks to come. Hedge funds have had to liquidate their holdings to raise cash to meet margin calls and redemptions. The resulting selling has exacerbated price action in the market, money managers said. US government debt prices were relatively steady, a notable change compared with previous sharp selloffs in the stock market that have led to solid demand for Treasuries. Investors may need to raise cash by selling Treasuries, keeping prices in check. In addition concerns about heavy new issuance to fund bank rescue packages may also be weighing on Treasuries, traders said. The benchmark 10-year note dipped 2/32 in price to yield 3.959 percent, up 1 basis point from late US trading on Wednesday. The two-year note was steady in price to yield 1.568 percent. The US dollar benefited from a rush out of risky assets, especially emerging market currencies such as the won. The euro fell 0.5 percent to $1.3389, edging back toward a 1- year low of $1.3258 hit on trading platform EBS on Friday. The dollar rose 0.6 percent to 100.23 yen, pulling away from a six-month low of 97.91 yen hit on Friday. Anticipation of much slower growth and thereby reduced demand knocked raw materials prices. The November US light crude future fell for a third day to a new 13-month low of $72.22 a barrel on Thursday, down 3.25 percent. London copper fell 7.6 percent to its lowest since 2006.
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