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Asia: Markets extend rout as volatility returns

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[HONG KONG] Asian stock markets took another battering Wednesday, with Tokyo leading another day of sharp losses as investors grow increasingly worried about the world economy and the possibility of a global recession.

As more bourses reopened after the Lunar New Year break, they 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.

Energy firms were once again in the firing line after oil prices sank below US$28 a barrel again, 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 per cent 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 2.4 per cent by the break, extending the 5.4 per cent collapse Tuesday, as the yen climbed against the dollar to levels not seen since late 2014.

Sydney shed 2.2 per cent and Singapore, returning from a two-day holiday, sank 2.1 per cent while Manila lost more than one per cent.

Among energy plays Sydney-listed Woodside shed 3.5 per cent and miner BHP Billiton was almost four per cent off. In Tokyo JX Holdings was 2.4 per cent off and Inpex eased 1.5 per cent.

Their losses came as crude continues to be buffeted by the global supply glut, overproduction and weak demand that has sent it crashing more than 70 per cent from mid-2014 highs.

On Tuesday US benchmark West Texas Intermediate slumped almost six per cent and Brent lost 7.7 per cent after the International Energy Agency warned there was unlikely to be any easing of fundamentals.

Investors are now awaiting the release later Wednesday of the weekly US stockpiles report looking for an idea about demand in the world's top economy and consumer of oil.

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 two per cent and Mitsubishi UFJ lost 3.5 per cent. In Singapore UOB lost 2.3 per cent while Sydney-listed ANZ was 3.5 per cent off and Westpac gave up 2.3 per cent.

Investors are keeping a close eye on Federal Reserve chief Janet Yellen's congressional testimony later in the day to see what signals she gives on interest rates. There are hopes she will sound a cautious tone after the turmoil that has ravaged markets this year.

AFP