Wall Street casts shadow on Asia

Asian equity markets sink on Wall Street woes

Asian equity markets are showing a distinctive North/South split today. The northern Asia heavyweights, with the highest beta to the US tech rally and China, and with the highest percentage of speculative zeal, have plummeted. ASEAN markets, with less technology darlings and a high percentage of old school banks and property heavyweights are down, but much less so.

The sharp rise in US yields overnight broke the already fragile spirit of Wall Street, helped along by testimony from Chairman Powell that wasn’t as dovish as hoped, and rising fears over the US debt ceiling. The S&P 500 slumped by 2.04%, while the Nasdaq plummeted by 2.83% and the Dow Jones fell by 1.62%. As Wall Street reluctantly assimilates Fed tapering implications, it is not yet clear whether the buy-the-dip army has finally been halted. Index futures on all three indexes have rallied by over 0.50% in Asia, suggesting a Napoleonic retreat from the gates of Moscow is not yet a done deal. We have also been led to water quite a few times by rising yields in the US, only for it to be found wanting.

Japan markets, the centre of much speculative fervour of late have tumbled, with the Nikkei 225 down 2.83%. The Kospi is also suffering, falling by 2.0%. In China, the Shanghai Composite has fallen by 1.80% followed by the CSI 300, down 1.55%. Hong Kong is calm comparatively, perhaps with one eye on the US futures. The Hang Seng is only 0.65% lower.

Singapore is a bastion of calm, the STI climbing 0.05% today. Kuala Lumpur is down 0.40% with Jakarta also modestly in the green, up 0.15%. Taiwan though has plummeted by 1.80% in keeping with its Northern Asian neighbours with its heavy weighting towards tech. Bangkok and Manila are both down 0.40%. Australian markets are also lower with the ASX 200 and All Ordinaries falling by 1.0%.

The stabilising of base metal prices and the rally by US index futures appears to have limited the fallout in ASEAN markets today, along with  a lower beta to technology in favour of cyclical sectors. That is likely to be of cold comfort to Europe though, which will head south this afternoon, although, like ASEAN, I suspect the losses will be more limited. Much will depend, I believe, on whether the rally in US index futures in Asia is sustained or turns out to be a false dawn.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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