Asia falls as Shanghai enters bear market

HONG KONG: The volatility that has characterised the start of the year extended into another session yesterday, with beleaguered Asian markets mostly falling with investors rushing to the sidelines after some early promise.

The day started well following a surge on Wall Street but momentum faded in the afternoon as the common themes of falling oil prices and China’s struggling economy --which have wiped trillions off world markets so far in 2016 --resurfaced.

Shanghai again led the losses, ending 3.6% down and entering a bear market, a term defined as a 20% fall from a recent high.

The loss topped off a rollercoaster week as a better-than-expected reading on Chinese trade failed to eradicate worries about the economy, which is at its weakest in 25 years.

The losses followed a near two percent rise Thursday, which reports said was fuelled by government cash buying key state-backed companies.

The index has now fallen almost 20% since the end of last year as China’s leaders struggle to get a grip on the growth slowdown. Their bungling of the crisis, and their recent weakening of the yuan currency, has reverberated globally.

“Sentiment on the yuan has to stabilise before we see stability returning to the equity market,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong.

Yesterday saw most regional bourses tick cautiously higher before going into reverse.

Tokyo fell 0.5%, Sydney lost 0.3%, Seoul shed 1.1% and Hong Kong slipped 1.5%.

US dealers opened the door to a bright trading day, with all three Wall Street indexes ending sharply higher.

Traders took heart after James Bullard, head of the Federal Reserve’s St. Louis Branch -- the central bank considered in favour of more rate hikes -- suggested the bank might be cautious about additional rises in light of the latest market turmoil.

A recovery in oil prices also boosted sentiment in New York, with both contracts for black gold having fallen below $30 a barrel this week for the first time in 12 years.

However, it resumed its downtrend in Asia with West Texas Intermediate down 2.7% and Brent off 1.5% in the afternoon. Oil has dived by three quarters in the past 18 months owing to weak demand, a slowing global economy and a supply glut.

Both contracts this week briefly dipped below $30 a barrel for the first time since the first half of 2004.