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ASIA-MARKETS-UPDATE
Asian equities dive as emerging market fears add to trade woes
HONG KONG, Sept 5, 2018 (BSS/AFP) – Asian markets tumbled Wednesday on
growing concerns about emerging market economies, adding to the uncertainty
stoked by Donald Trump’s trade rows with China and Canada.
After Turkey and Argentina’s recent headline-making problems, South Africa
became the latest country to spark panic Tuesday with data showing a shock
plunge into recession for the one-time economic starlet.
The news sent the rand plunging in a similar way to the Argentine peso and
Turkish lira in recent weeks. Observers increasingly fear the problems could
spread to other emerging market (EM) countries and possibly spill over into
major economies.
“South Africa is back in recession and that was not expected,” said Greg
McKenna, chief market strategist at AxiTrader.
“The big question is whether this is a… tipping point for EM markets and
if the idiosyncratic issues are now adding up to something more structurally
pernicious for EM markets. My guess? Yes, it is.”
The brewing crisis has seen currencies in a number of emerging markets —
mostly with deep current account deficits — take a hammering.
India’s rupee was sitting at a record low and the Indonesian rupiah at
levels last seen during the 1998 Asian financial crisis.
Indonesia said it would take unspecified action against currency
speculators and announced plans to delay import-heavy energy projects in
order to focus efforts on reducing imports and supporting the rupiah.
Adding to selling pressure on emerging market currencies is the US
economy’s continuing strength, which is forcing the Federal Reserve to raise
interest rates. This leads investors to seek better and safer returns in the
US.
– Trade in focus –
Data showing an index of manufacturing activity hitting a 14-year high
bolstered expectations the Fed will continue to increase borrowing costs.
Crucial US jobs data is due out on Friday.
The EM fright is also hitting equities, with investors already on edge as
a deadline approaches this week for a public consultation on Trump’s proposal
to impose tariffs on $200 billion of Chinese imports, on top of the $50
billion already being hit.
MORE/HR/1428
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ASIA-MARKETS-UPDATE 2 LAST HONG KONG
While the two sides have held low-level talks there are fears the measures
will be implemented, which would spark a retaliation from Beijing and push
the world’s top two economies closer to an all-out trade war.
Tokyo ended 0.5 percent lower, with the closure of Kansai airport, a key
cargo hub particularly for electronic parts, following a strong typhoon
acting as a drag on several stocks.
Chip-making devices firm Tokyo Electron lost 1.6 percent, while cosmetics
giant Fancl collapsed almost 10 percent on fears the effects of the typhoon
could scare off tourists, who are major buyers of Japanese make-up.
Hong Kong shed 2.6 percent and Shanghai fell 1.7 percent, while Singapore
gave up 1.2 percent and Seoul dipped more than one percent.
Sydney fell one percent despite news that the Australian economy expanded
far more than expected in the second quarter thanks to a pick-up in exports
and consumer spending. The local dollar was marginally higher.
Jakarta led a sell-off in EM equities, diving four percent, while Manila
was more than two percent lower and Bangkok lost 0.8 percent.
“There seems to be no sign of halting the downtrend” for emerging-market
assets, Koji Fukaya, chief executive officer at FPG Securities in Tokyo, told
Bloomberg News.
“Investors have become more selective and countries with negative news
such as weak economic growth, weak external balances and high inflation face
stronger sell-offs.”
Eyes are also on the resumption of talks Wednesday between the US and
Canada aimed at reviewing NAFTA.
Optimism sparked by Mexico’s deal last week with Washington was soon
tempered by the failure to close a deal between the US and Canada, with Trump
threatening to leave Ottawa out of the pact altogether.
Canadian Prime Minister Justin Trudeau stressed that no deal is better
than a bad deal for his country.
London’s FTSE fell 0.3 percent at the open, while Paris and Frankfurt each
shed 0.4 percent.
– Key figures around 0810 GMT –
Tokyo – Nikkei 225: DOWN 0.5 percent at 22,580.83 (close)
Hong Kong – Hang Seng: DOWN 2.6 percent at 27,243.85 (close)
Shanghai – Composite: DOWN 1.7 percent at 2,704.34 (close)
London – FTSE 100: DOWN 0.3 percent at 7,434.69
Euro/dollar: DOWN at $1.1573 from $1.1600 at 2100 GMT
Pound/dollar: DOWN at $1.2838 from $1.2900
Dollar/yen: UP at 111.46 yen from 111.45 yen
Oil – West Texas Intermediate: DOWN 85 cents at $69.02 per barrel
Oil – Brent Crude: DOWN 70 cents at $77.47 per barrel
New York – Dow: DOWN 0.1 percent at 25,952.48 (close)
BSS/AFP/HR/1430