Monday, 12 September 2016

Hong Kong notches biggest drop since February as Asian stocks plunge

Asian shares started the week notably weaker as fears of a possible U.S. interest-rate increase gripped markets, with investors assessing the potential impact on growth.

“We are taking the selloff in the U.S. [on Friday] very, very seriously,” said Amir Anvarzadeh, global head of equity sales for Japan at BGC Partners. He said the equities weakness on both sides of the Pacific indicates a reversal in trend. “Whatever growth we are getting [globally] could slow down” if interest rates rise, Anvarzadeh added.

Emerging markets in Asia are particularly vulnerable to a rate increase in the U.S. as better returns there could prompt a flight of capital from less-developed areas. But some say strong growth and the potential for earnings to pick up faster in Asia will temper any sharp withdrawals.

After U.S. stocks on Friday posted the biggest declines since the initial post-Brexit drops, following a summer devoid of volatility in equities trading there, Australia’s S&P/ASX 200 XJO, -2.24% declined 2.2% Monday and Taiwan’s Taiex Y9999, -1.18% dropped 1.2% — both finishing at their lowest levels in two months.

Hong Kong’s Hang Seng Index HSI, -3.36% skidded 3.3% to 23,310.33, the biggest drop since February.

The Shanghai Composite SHCOMP, -1.85% shed 1.9%, finishing at a 1-month low, and the Nikkei Stock Average NIK, -1.73% ended down 1.7%.

Korea’s Kospi SEU, -2.28% , which notched its largest decline in two months Friday, topped that with a 2.3% decline. Samsung Electronics Co. 005930, -6.98% SSNHZ, +0.00% ,which makes up one-sixth of the index, notched its biggest decline in four years, with a 7% slide on more worries about the Galaxy Note 7.

Easy monetary policies have propped up asset prices globally since the financial crisis nearly a decade ago. “Record capital outflows from Japan in recent months, if not years, oiled the wheels of global finance,” said Frederic Neumann, co-head of Asian Economics Research at HSBC.

Alex Furber, a senior client services executive at CMC Markets in Singapore, added: “U.S. stocks were overvalued, and a correction there was due for some time.”

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