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[TOKYO] Asian stocks fell, with the regional benchmark index headed for its lowest since March 2014, after US shares succumbed to snowballing selloff spurred by fears about the global economy.
The MSCI Asia-Pacific Index slipped 1.3 per cent to 132.58 as of 9:10 am in Tokyo, heading for a fifth weekly decline. The Standard & Poor's 500 Index tumbled the most in 18 months on Thursday, while a gauge of global equities dropped to its lowest level since January. As the Federal Reserve inches closer toward raising interest rates for the first time since 2006, anxiety over developing markets is increasing, with China's surprise yuan devaluation last week triggering similar moves elsewhere in Asia.
"The overnight weakness in global markets is making people nervous," Angus Gluskie, managing director at White Funds Management Pty in Sydney, who oversees US$550 million, said by phone. "The biggest concern among investors right now is the market volatility in China that shows investors are increasingly concerned about the health of the Chinese economy and how that might impact the rest of the world." Gauges of manufacturing in China and Japan due Friday may offer further insight into the health of the global economy, as concerns about demand drive a commodities rout that has erased US$2 trillion in the value of mining and oil companies since the middle of last year.
South Korea's Kospi index fell 2.7 per cent, heading for the biggest drop in three years. Japan's Topix index slumped 1.8 per cent. Australia's S&P/ASX 200 Index slid 0.2 per cent. New Zealand's NZX 50 Index dropped 0.3 per cent. Markets in China and Hong Kong have yet to open.
Hong Kong's Hang Seng Index slumped 1.8 per cent on Thursday, flirting with a bear market, as declines in mainland equities and the devaluation of the yuan erode support for the city's shares.
China's Shanghai Composite Index dropped 3.4 per cent on Thursday amid concern a slowing economy and weaker yuan will spur capital outflows. The Hang Seng China Enterprises Index sank 2.3 per cent to its lowest close since November.
Chinese stocks fell this week after the securities regulator indicated a week ago that the state will reduce buying and data showed the richest traders were cashing out.
Futures on the Standard & Poor's 500 Index rose 0.1 per cent. The underlying measure sank 2.1 per cent on Thursday, falling out of a 70-point trading range that had held for most of the year.
"US markets have held up well of late, being viewed as somewhat of a safe haven," Chris Weston, chief market strategist in Melbourne at IG Ltd, said by e-mail. "This view seems to have deteriorated somewhat with the S&P 500 closing below its multi-month trading range. If we do see something much more pronounced in global markets, the epicenter is Asian emerging markets." Greek Prime Minister Alexis Tsipras announced he will step down with an eye to snap elections, a move the embattled leader will likely use to shut out dissenters and return to power with a more manageable coalition.
"Greece is a non-issue since a deal with creditors has been done," White Funds' Gluskie said. "He is trying to get a bigger mandate of support. If he gets the mandate, he would be in a better position in handling the Greek parliament."