AFP, 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 per cent down and entering a bear market, a term defined as a 20 per cent 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 per cent rise Thursday, which reports said was fuelled by government cash buying key state-backed companies.
The index has now fallen almost 20 per cent 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 percent, Sydney lost 0.3 per cent, Seoul shed 1.1 per cent and Singapore slipped 0.5 per cent in late trade. Hong Kong slipped 1.5 percent. However, there were gains in Wellington, Taipei and Manila.
“The week has certainly been unpredictable and very volatile,” Geoffrey Ng, a Kuala Lumpur-based director at Fortress Capital Asset Management, told Bloomberg News.
He added that as regional markets have fallen “we’re seeing opportunities emerge”, although he said it was hard to gauge what the trend will be in the next few weeks.
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 per cent and Brent off 1.5 per cent 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. The retreat in crude has battered Anglo-Australian mining giant BHP, which said yesterday it expects to post a US$7.2 billion pre-tax writedown, adding that it will further reduce the number of onshore US rigs.
Chief executive Andrew Mackenzie blamed “significant volatility and much weaker” prices in the oil and gas industry, adding that the company had been forced to reduce its medium- and long-term price assumptions.