Mar­ket up­trend short­lived

G20 fever is over as Asian stock traders buckle up for tur­moil

The Star Malaysia - StarBiz - - Foreign News -

HONG KONG: Easy come, easy go. Mon­day’s 2% surge in Asian stocks is now all gone.

What ini­tially started off as in­vestor eu­pho­ria af­ter a trade truce from Trump and Xi’s meet­ing at the G20 has dis­si­pated in a span of two days. Tues­day’s slump was mainly due to a big sell-off in Ja­pan amid profit-tak­ing and con­cerns sur­round­ing the lack of clar­ity around the 90-day trade-war cease­fire. Then US stocks plunged overnight and, by ex­ten­sion, the de­cline came to Asia.

With the po­ten­tial for more tweets and state­ments about the trade truce and plans be­tween the world’s largest economies on tar­iffs, one thing is clear – volatil­ity, which has spiked this week, is here to stay. Prime ex­am­ples are the moves in the Shang­hai Com­pos­ite In­dex and Topix Wed­nes­day: the Chi­nese bench­mark plunged 1.5% at the open but pared it to a 0.5% drop, while the Ja­panese bench­mark erased more than half of its de­cline and close 0.5% lower.

To be clear, it’s not that there aren’t any good news:

> There are signs emerg­ing from China sug­gest­ing that the coun­try is mak­ing progress in solv­ing trade ten­sions: Af­ter an­nounc­ing an ar­ray of pun­ish­ments over in­tel­lec­tual-prop­erty theft, the na­tion said yes­ter­day that it will quickly im­ple- ment trade agree­ment with the United States.

> China’s ser­vices in­dus­tries ex­panded in Novem­ber at a faster-than-ex­pected pace.

> Markit PMI data sug­gest that emerg­ing mar­kets’ economies have sta­bilised, and Bloomberg Mar­kets Live blog’s Ye Xie sees this of­fer­ing some sup­port for more sus­tained gains in the as­sets.

But, for now, it looks like none of these can fully al­le­vi­ate in­vestors’ grow­ing fears over a global eco­nomic slow­down, es­pe­cially when a seg­ment of the US Trea­sury curve in­verted for the first time in a decade. De­scrib­ing this as a “pri­mary con­cern” for in­vestors, Tai Hui, chief Asia Pa­cific mar­ket strate­gist at JPMor­gan As­set Man­age­ment, said the stock mar­ket will be­come more volatile as the US econ­omy get into the late cy­cle.

“On a risk-ad­justed re­turn ba­sis, eq­ui­ties may start to look less ap­peal­ing than in the past,” he wrote in an emailed note.

In an in­ter­view, PT Pin­na­cle Per­sada In­ves­tama strate­gist John Rach­mat said US re­ces­sion wor­ries are a much big­ger con­cern than the ear­lier per­ceived gen­eral slow­down in global eco­nomic growth.

Steve Me­d­ina, chief in­vest­ment of­fi­cer of global eq­ui­ties at Man­ulife As­set Man­age­ment, said tech­ni­cal sell­ing, the yield-curve in­ver­sion, con­tin­ued Brexit wor­ries and un­cer­tainty around fu­ture Fed­eral Re­serve pol­icy are be­hind the stock sell-off.

CMC Mar­kets Sin­ga­pore an­a­lyst Mar­garet Yang Yan said in an emailed note that “fear of growth slow­down next year against the back­drop of trade un­cer­tain­ties and ris­ing in­ter­est rates has started to erode the foun­da­tion of this bull mar­ket, spurred hunt­ing for safety and cash.”

In South-East Asia, Philip­pine stocks are set to end a two-day rally, even though the coun­try’s in­fla­tion started to ease. Sin­ga­pore’s Straits Times In­dex also re­treated more than 1%. Thai­land is closed yes­ter­day.

And for US stock traders, mar­kets was closed yes­ter­day for a na­tional day of mourn­ing to hon­our for­mer Pres­i­dent Ge­orge H.W. Bush, with fu­tures hav­ing a short­ened trad­ing ses­sion. US eco­nomic data will also be de­layed as well as an an­tic­i­pated tes­ti­mony to law­mak­ers by Fed­eral Re­serve chair­man Jerome Pow­ell.

— Reuters

Wall Street plunges: A man walk­ing past an elec­tronic board show­ing US stock mar­ket in­di­ca­tors out­side a bro­ker­age in Tokyo yes­ter­day.

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