Monday, August 8, 2022

Asian stocks fall after Wall Street suffers biggest sell off of 2021

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Stocks in the Asia-Pacific region fell after Wall Street stocks suffered their worst day since October, as fears over the impact of new coronavirus strains and high valuations affected investor sentiment.

Japan’s benchmark Topix fell 1.1% early in Thursday, while in Australia the S & P / ASX 200 fell 2.2%. Hong Kong’s Hang Seng Index, which hit multi-year highs earlier this week, fell 0.9% and the CSI 300 for stocks listed in Shanghai and Shenzhen fell 1.3%.

The wave of investor pessimism in the region came after US stocks have been hit by a combination of new fears about the spread of Covid-19 and rising stock prices.

The S&P 500, which has rebounded strongly since March when the pandemic first hit global markets, fell 2.6% on Wednesday after hitting a record earlier in the week. Futures on S&P 500 edged down 0.1% during Asian trading.

“Investors should watch, but not fear, the risk of a correction,” said Tai Hui, chief Asian market strategist at JPMorgan Asset Management.

He added that JPMorgan was “still constructive on global economic fundamentals” over the next 12 to 18 months. This should support equities, emerging market debt and corporate credit, but Hui suggested investors “should take a more diversified approach.”

The stock sale occurred despite the Federal Reserve reassuring markets Wednesday that it would keep its monetary policy loose by keeping its main lending rate close to zero.

However, markets have been rocked by concerns about new coronavirus variants as well as the speed at which vaccines could be deployed.

In China, where the recovery from the coronavirus is more advanced than in other major economies, a central bank adviser this week warned that asset bubbles would persist if monetary policy was not adjusted.

The People’s Bank of China on Thursday withdrew 150 billion rmb ($ 23.2 billion) in liquidity through its open market operations – a process by which the central bank and the banking system lend to each other – in the biggest movement of its kind since October.

The markets also continued to digest the policies of US President Joe Biden, including delays in his proposed recovery plan.

Overnight, the US Treasury delayed implementation a ban on Americans investing in around 35 companies suspected of having ties to the Chinese military, which Donald Trump imposed after losing the presidential election last year.

The ban, which would also have forced the liquidation of all U.S. holdings in those companies by November, was due to go into effect Thursday. The Biden administration extended the deadline to May 27 on Wednesday. Hong Kong-listed shares of China Mobile, China Telecom and China Unicom – three groups included in the ban – rose between 0.7% and 2.3%.

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