Region sees sell-off amid global turmoil
Regional bourses suffered a unanimous sell-off yesterday as Italy’s domestic political crisis and the Trump administration’s plan to impose 25% tariffs on Chinese imports rattled investor confidence.
Major regional bourses closed in the red, with Japan’s Nikkei 225 and China’s Shanghai SE Composite index dropping by 1.5% and 2.5%, respectively.
Malaysian shares performed the worst in Asean, slumping by 3.2% to their lowest close since December 2017, according to Reuters.
The Stock Exchange of Thailand (SET) was not immune to investor panic, sagging 0.5% to close at 1,725.14 points in trade worth 77.5 billion baht.
At one time, the Thai bourse was down by 22.81 points at 1,711.73 during trading hours.
Foreign investors were net sellers of 4.4 billion baht, with brokerage firms selling 479.5 million worth of shares. On the other hand, retail investors were net buyers of 4.5 billion baht and institutional investors bought 351.3 million.
Italy’s domestic political instability, where a new election could occur after the president intervened in the process of forming a new government, is the key external factor spooking investors, said Terdsak Taweetheeratham, senior vice-president at Asia Plus Securities.
Italy has been without a government since elections in March because no political group can form a majority.
On the domestic front, political factors are still putting pressure on investor confidence regarding the general election’s organic law, Mr Terdsak said.
Negative factors still have not affected the SET’s fundamentals, he said, as Thailand’s GDP growth registered 4.8% yearon-year in the first quarter and average oil prices still remain at US$65 per barrel.
Italy’s economy is 10 times the size of Greece’s and is burdened with the world’s fourth-largest public debt, said Oanda AsiaPacific head of trading Stephen Innes.
Given how an imminent Italian election may amount to a referendum on the euro, there is a flight to safety from European assets beyond Italian borders, sending an Italian tsunami warning across global markets, Mr Innes said.
“European capital markets are in chaos, as it may end up being more than just Rome that is burning,” he said.
“With contagion spreading to international markets, investors are exiting the euro en masse. In addition to loading up on US Treasury bonds, investors are seeking shelter under the US dollar and yen umbrella, awaiting the dust to settle in Europe.”
Renewed anxiety over the China-US trade war also exacerbated the regional equity sell-off, as the US has said it plans to impose 25% tariffs on $50 billion (1.6 trillion baht) worth of Chinese imports “shortly” after mid-June.
The White House said that a final list of imports slated for tariffs will be published by June 15, according to the BBC.
External factors have reignited investors’ concerns, prompting capital to flow into safe haven assets, said Asia Wealth Securities head of research Vajiralux Sanglerdsillapachai.
The politics and fears of an economic hit across the euro zone have driven investors into US treasuries and German bunds, pushing yields 15-20 basis points lower, according to Reuters.