Asian stock markets took another battering yesterday, with Tokyo leading a day of sharp losses as investors grow increasingly concerned about the world economy and the possibility of a global recession.
More bourses reopened after the Lunar New Year break but immediately plunged into the red, playing catch-up with a rout that has seen billions wiped off valuations from Sydney to Frankfurt to New York this year.
Energy firms were once again in the firing line after oil prices sank below $28 a barrel on Tuesday, while financial plays are also coming under increasing pressure as investors fret about their bottom lines in the face of the economic slowdown.
The sell-off is the latest in the past six weeks that has seen severe volatility around the world, fuelled by China’s growth slowdown and a crash in crude prices.
The Chicago Board Options Exchange Volatility Index, which measures market turbulence, is sitting around five-month highs and has jumped 20% since Friday.
“Contributing to the drop in oil and certainly having a large impact on the drop in equities is this growing concern about the sustainability of the recovery, the state of economic growth in China and increasingly the state of growth in the US,” Russ Koesterich, global chief investment strategist for New York-based BlackRock, told Bloomberg TV.
“People are getting worried about the global recession, worried about growth, which is affecting not only oil and stocks but other risky assets as well.”
Japan’s Nikkei index lost 2.3% to close at its lowest level since October 2014, extending the 5.4% collapse on Tuesday as the yen climbed against the dollar.
Sydney shed 1.2%. Singapore, returning from a two-day holiday, sank 2.1% in the afternoon while Wellington, Manila and Mumbai also lost out.
Among energy plays Sydney-listed Woodside shed almost 1% and miner BHP Billiton was 2.5% off. In Tokyo JX Holdings was more than 2% off and Inpex eased 2.8%.
Crude continues to be buffeted by the global supply glut, overproduction and weak demand that has sent oil prices crashing more than 70% from mid-2014 highs.
On Tuesday, US benchmark West Texas Intermediate slumped almost 6% and Brent lost 7.7% after the International Energy Agency warned there was unlikely to be any easing of fundamentals.
Bargain buying helped both contracts climb 1.5% yesterday.
Investors are now awaiting the release of the weekly US stockpiles report as they seek clues to demand in the world’s top economy and oil consumer.
Asia’s banks were also taking a beating following big losses in their European counterparts as economic fears continue to bite.
Japanese giant Sumitomo Mitsui lost more than 5% and Mitsubishi UFJ lost 7%. In Singapore UOB lost 1.9% in late trade while Sydney-listed ANZ was 1.6% off and Westpac gave up 0.6%.