Asian shares slip as bank fears add to global gloom

The Pak Banker - - MARKETS/SPORTS -

Asian shares fell for a sixth straight ses­sion on Fri­day as con­cerns about the health of Euro­pean banks fur­ther threat­ened a global econ­omy al­ready un­der strain from fall­ing oil prices and slow­downs in China and other emerg­ing mar­kets. The prices of yen, gold and liq­uid govern­ment bonds of favoured coun­tries soared as in­vestors rushed to tra­di­tional safe-haven as­sets.

"The mar­kets are clearly start­ing to price in a sharp slow­down in the world econ­omy and even a re­ces­sion in the United States," said Tsuyoshi Shimizu, chief strate­gist at Mizuho As­set Man­age­ment. "I do not ex­pect a col­lapse or ma­jor fi­nan­cial cri­sis like the Lehman cri­sis but it will take some be­fore mar­ket sen­ti­ment will im­prove," he added.

MSCI's in­dex of Asia-Pa­cific shares out­side Ja­pan fell 0.8 per­cent. Ja­pan's Nikkei (.N225) fell 5.4 per­cent to a 15month low and posted a weekly loss of 11.1 per­cent, its big­gest since Oc­to­ber 2008, as this week's sud­den spike in the yen took most in­vestors by sur­prise.

"It is hard to find a bot­tom for stocks when the yen is strength­en­ing this much. It is hard to be­come bullish on the mar­ket in the near fu­ture," said Masaki Uchida, ex­ec­u­tive di­rec­tor of equity in­vest­ment at JPMor­gan As­set Man­age­ment. "But the val­u­a­tion of some (Ja­panese) bank shares is ex­tremely cheap. So for long-term in­vestors, it could be a good level to buy," he added. Euro­pean shares are ex­pected to re­bound, how­ever, af­ter big falls ear­lier this week, with spread-bet­ters ex­pect­ing Bri­tain's FTSE (.FTSE) to rise 2.0 per­cent and Ger­man's DAX and France's CAC (.FCHI) to gain 1.3 per­cent.

The FTSEurofirst 300 (.FTEU3) in­dex of top Euro­pean shares sank 3.7 per­cent to its low­est level in 2-1/2 years. Fi­nan­cial shares led losses in Aus­tralia (.AXFJ) and Hong Kong (.HSNF), fall­ing 1.6 per­cent and 1.8 per­cent though their de­clines are still mod­est com­pared to peers in Europe and the US. "We have been hit by a steady spate of bad news since the year be­gan and I think the mar­kets will re­main in a state of flux in the near term un­til we see global bank shares stabilising," said Fran­cois Per­rin, port­fo­lio man­ager for East Cap­i­tal Asia in Hong Kong. MSCI's broad­est gauge of stock mar­kets fell 0.6 per­cent in Asia on Fri­day, hit­ting a fresh low since June 2013.

It has fallen fell more than 20 per­cent below its record high last May, con­firm­ing global stocks are in a bear mar­ket. On Wall Street, the U.S. bench­mark S&P 500 (.SPX) fell 1.23 per­cent to 1,829.08, its low­est close in al­most two years and down 10.5 per­cent for the year.

Fi­nan­cial coun­ters led the losses glob­ally as dis­ap­point­ing earn­ings from So­ci­ete Gen­erale (SOGN.PA) added to the gloomy mood brought on by poor re­sults from Deutsche Bank ( DBKGn.DE) last month. Banks in Europe ended 6.3 per­cent (.SX7P) lower, while the S&P fi­nan­cial in­dex (.SPSY) dropped 3 per­cent. Stress in the fi­nan­cial sec­tor is stok­ing wor­ries that fund­ing con­di­tions for some com­pa­nies may tighten, even as many of the world's cen­tral banks pump in funds through un­ortho­dox mea­sures.

A fund­ing crunch could be a death knell for some firms, es­pe­cially those in the en­ergy sec­tor which have strug­gled to make ends meet as oil trades at around a quar­ter of its value just a few years ago. In a wor­ry­ing sign that Europe's debt prob­lems could reap­pear, the Por­tuguese 10year bond yield­surged above 4 per­cent for the first time since 2014.

That is a clear de­par­ture from last year when in­vestors, hunt­ing for yield, were buy­ing up debt from Por­tu­gal and other in­debted coun­tries. In con­trast, in­vestors are now flock­ing to more liq­uid, and higher-rated bonds. The 10-year U.S. Trea­suries yield fell to as low as 1.530 per­cent , a low last seen in Au­gust 2012, which is just be­fore the Fed started its third round of quan­ti­ta­tive eas­ing. It stood at 1.657 per­cent in early Asian trade. Fed­eral funds rate fu­tures al­most com­pletely priced out the chance of a rate hike.

As the dol­lar's rel­a­tive yield ad­van­tage erodes fur­ther, the strength­en­ing yen touched 110.985 to the dol­lar (JPY=) on Thurs­day, ris­ing al­most 10 per­cent from its six-week low on Jan. 29, when the Bank of Ja­pan in­tro­duced neg­a­tive in­ter­est rates. The cur­rency last stood at 112.10 yen (JPY=), hardly show­ing any re­ac­tion af­ter Ja­panese Fi­nance Min­is­ter Taro Aso stepped up his ver­bal in­ter­ven­tion on Fri­day, say­ing he would take ap­pro­pri­ate ac­tion as needed.

The euro also at­tracted some safe­haven flows to trade at $1.1304 (EUR=), hav­ing hit a near four-month high of $1.1377 on Thurs­day. Gold surged to oneyear high of $1,262.90 per ounce (XAU=) on Thurs­day, ris­ing over four per­cent in its big­gest daily per­cent­age gain since Septem­ber 2013. It last stood at $1,237.5. U.S. crude fu­tures (CLc1) rose to $27.44 per bar­rel, up 4.7 per­cent from late U.S. lev­els, helped by com­ments from an OPEC en­ergy min­is­ter spark­ing hopes of a co­or­di­nated pro­duc­tion cut.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.