Asian markets tumble, Japanese stocks plunge over 7%

August 05, 2024 (MLN): Asian stocks tumbled at the start of a new week as fears of a deeper US economic slowdown and rising tensions in the Middle East prompted investors to shun risk assets, as reported by Bloomberg.

Equity gauges across the region stared at bleak milestones early on Monday, with Japan and the tech-heavy markets of Taiwan and Korea bearing the brunt of the selloff.

The MSCI Asia Pacific Index plunged as much as 3.8% following a similar decline on Friday, with financial shares another major drag.

Monday’s rout brought the regional equity benchmark a whisker away from erasing it gain for the year, while its slide from a July 11 peak approached the 10% mark — which would signal a technical correction.

In Japan, the Topix and Nikkei 225 gauges slid more than 7% each in early trading as investor confidence crumbled on a surge in the yen, tighter monetary policy and broader concern about the US economy.

The declines drove recent losses for the two indexes to more than 20% each, putting them on track for bear markets.

Taiwan Semiconductor Manufacturing Co., the largest stock on the MSCI Asia gauge by market value, lost more than 7%, dragging the Taiex lower with it.

South Korea’s benchmark Kospi Index slid over 5% as the rotation away from tech-heavy markets intensified.

The Kospi also took its losses from a July 11 peak to more than 10% to head for a technical correction, with data showing that foreign investors led Monday’s selloff.

A circuit breaker halted trading of Topix futures for about 10 minutes, while Korea’s stock bourse also temporarily halted sell orders for program trading in the Kospi after futures on the Kospi 200 Index plunged more than 5%.

“Sentiment toward stocks will likely remain fragile for now as the market debate will likely remain on US soft-landing versus a recession, with the next major labor market report a month out,” said Chetan Seth, an Asia-Pacific equity strategist at Nomura Holdings Inc.

The flight to safety has intensified after weak US economic data spurred concern that the Federal Reserve may have been behind the curve in cutting rates and will now likely need to ease monetary policy aggressively to head off a recession.

Meanwhile, geopolitical tensions in the Middle East also sapped risk appetite as Israel braced for a possible attack from Iran and regional militias in retaliation for assassinations of Hezbollah and Hamas officials.

This “feels more like a global equities risk off in general and the profit taking is being done in sectors or geographies that have done well,” said Vey-Sern Ling, managing director at Union Bancaire Privee.

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