AFP
Tokyo
Resources firms led by mining giant Glencore headed a deep sell-off in Asian markets yesterday following painful losses across Europe and New York as fears about China’s slowing growth resurfaced.
The yen rallied while higher-risk emerging market currencies took another hit ahead of key US jobs data Friday that could sway the Federal Reserve’s decision on when to raise interest rates.
India’s rupee suffered added selling pressure after the country’s central bank cut interest rates again.
Trading floors around the planet have witnessed extreme volatility since mid-August, when China devalued its yuan currency, fanning fears about the state of the world’s number two economy and crucial driver of global growth.
“The slowdown in China is spreading to other Asian economies, Brazil and Australia, and weakness in emerging countries could echo throughout the overall world economy,” Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News.
“We still don’t know when market fears will end about China’s slowdown, and because of this investors are turning to cash and safe assets.”
China’s growth has been slowing for several months and the economy is this year expected to see its worst performance in a quarter of a century.
Last week already fragile confidence was rattled by news that a gauge of factory activity in the country recorded its lowest level for six-and-a-half years in September. On Monday Beijing said key industrial companies saw profits fall 8.8% in August—hit by last month’s shock devaluation, weak demand and plunging stocks.
With China’s demand for resources waning and prices sitting at multi-year lows, commodities-linked firms took a hit. The hardest hit was Glencore, which lost 29.3% in Hong Kong.
The losses followed a near 30% plunge in its London-listed arm after online brokerage Investec warned about the impact of soft commodity prices on the group’s future. “We know all their businesses including agricultural, energy, or mining, all are in trouble,” securities analyst Jackson Wong told AFP.
“They are in a very tough situation...” said Wong, associate director at Simsen Financial Group.
Other resources firms also sank. In Sydney BHP Billiton plunged 6.65% and Rio Tinto shed 4.57%, while Origin Energy plunged 10.43% and Santos gave up more than 9%.
In Tokyo, oil firm JX Holdings lost 4.32% and Kubota—which makes tractors and heavy equipment—fell seven%. Industrial robot maker Fanuc, which has close links to China, was down 3.8%.
The losses dragged all Asia’s bourses lower. Tokyo was down 4.05% at the close, while Sydney shed 3.8%. Hong Kong lost 2.97% and Shanghai was 2.02% lower. Wellington and Singapore both shed more than 1%.
Markets in New York and Europe were equally sideswiped Monday.
The Dow, S&P 500 and the Nasdaq all saw hefty selling, while London, Frankfurt and Paris each lost more than 2%.
Foreign exchange dealers also fled to assets such as the yen which are considered safe in times of turmoil.
The dollar fell to ¥119.37 from ¥119.93 Monday in New York, while the euro slipped to ¥134.54 against ¥134.83.
On currency markets the resources-linked Australian dollar was down 0.6% against the US dollar at 69.48 cents, around six-year lows.
The South Korean won fell 0.58% against the US unit, the Thai baht shed 0.19% and Indonesia’s rupiah was 0.26% lower. Malaysia’s ringgit was down 1.2%.
The rupee eased 0.11% after the Reserve Bank of India (RBI) surprised analysts by lowering borrowing costs more than expected to try to shore up a tentative economic recovery.
Tuesday’s move was the fourth by the RBI this year.
Oil prices edged up after losing around 2.5% Monday.
US benchmark West Texas Intermediate added 0.05% to $44.45 and Brent was 0.19% up at $47.43.
A man looks at a share prices board in Tokyo. Japanese stocks closed down 4.05% yesterday.
