Asian markets a sea of red as coronavirus woes add to correction fears

Hong Kong - Tokyo, Hong Kong, Shanghai, Seoul, Singapore, Taipei were all down more than 1%, while Sydney and Wellington lost almost two percent and Jakarta also racked up sizeable losses.


Published: Thu 28 Jan 2021, 7:41 AM

Asian markets suffered further losses on Thursday, tracking a rout in New York and Europe as markets were hit by a perfect storm of worries about the slow rollout of vaccines, surging infections, a stuttering economic recovery, and high valuations.

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After a months-long rally sent several indexes to records or all-time highs, investors have started to fret in recent weeks about a possible correction and analysts say some losses are to be expected.

The Federal Reserve added to the sense of concern as it warned that the economy was struggling in the face of the new wave of coronavirus that is hammering the northern hemisphere, forcing governments to reimpose strict containment measures.

The US central bank said the “pace of the recovery in economic activity and employment has moderated in recent months” and said it would maintain its ultra-loose monetary policy for the foreseeable future.

Chair Jerome Powell added that “overall economic activity remains below its level before the pandemic, and the path ahead remains highly uncertain”.

While there were few surprises from the meeting and Powell’s comments, they provided a dose of reality to investors about the state of the economy, despite broad long-term optimism.

“Nerves about vaccine rollouts weighed on market sentiment and significant volatility among some stocks targeted by retail investors added to investor fluxomics,” said Axi Strategist Stephen Innes.

“Yes, the future looks bright, but the moment is hell.”

He added that hopes for the reopening of economies were “getting pushed back well into the second quarter due to messed up vaccination and rollout strategies”.

Worries about inoculations are rife, with the US and Europe struggling to get their programmes into gear owing to supply problems.

The European Union and Britain are locked in a row over access to AstraZeneca’s drug, with both sides insisting the company uphold contractual delivery promises to each of them — but it has warned there is not enough to go around.

All three main Wall Street markets ended more than two percent lower, while London, Paris and Frankfurt were each more than one percent off.

And Asia was also a sea of red.

Tokyo, Hong Kong, Shanghai, Seoul, Singapore, Taipei were all down more than one per cent, while Sydney and Wellington lost almost two percent and Jakarta also racked up sizeable losses.

And observers said prices would likely drop further before resuming advances.

“Investors should monitor, but not fear, the risk of a correction,” said Tai Hui, at JP Morgan Asset Management.

“We are still constructive on the global economic fundamentals over the next 12-18 months, which should support equities, corporate credit and emerging market fixed income.”

Hong Kong and Shanghai were also being squeezed by the Chinese central bank’s decision to suck liquidity out of financial markets as it looks to avert a bubble developing.

The move has put a brake on a massive spending spree in Hong Kong by mainland traders looking to take advantage of relatively cheap shares in the city.

Adding to the weakness in Hong Kong, Cathay Pacific plunged more than eight percent after the flag-carrier unveiled an $870-million bond sale to shore up its finances.

Investors have also been left deflated by signs that Biden’s proposed $1.9 trillion stimulus could be watered down and not even be ready until March with progress snarled up by the Senate impeachment trial of Donald Trump.

Tokyo - Nikkei 225: DOWN 1.1 percent at 28,323.06 (break)

Hong Kong - Hang Seng: DOWN 1.1 percent at 28,980.65

Shanghai - Composite: DOWN 1.1 percent at 3,535.62

Euro/dollar: DOWN at $1.2100 from $1.2115 at 2210 GMT

Dollar/yen: UP at 104.30 yen from 104.13 yen

Pound/dollar: DOWN at $1.3672 from $1.3684

Euro/pound: UP at 88.50 pence from 88.47 pence

West Texas Intermediate: DOWN 0.3 percent at $52.72 per barrel

Brent North Sea crude: DOWN 0.3 percent at $55.65 per barrel

New York - Dow: DOWN 2.1 percent at 30,303.17 (close)

London - FTSE 100: DOWN 1.3 percent at 6,567.37 (close)

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