MARKETS plunged on the first trading day of the new year, led by a 7 per cent crash in China stocks that halted trading there for the day.
Amid weakening China manufacturing data, renminbi traded outside the mainland fell to a five-year low against the US dollar, and most Asian currencies also fell. Political tensions between Iran and Saudi Arabia weighed on sentiment.
Veteran investors downplayed the market drama, saying that volatility was characteristic of a retail investor-dominated market such as China.
"I don't think there's any unexpected economic data announced today or yesterday. The manufacturing index is weak, but that has been expected for months," said Wong Kok Hoi, founder and chief investment officer of APS Asset Management. APS had US$2.3 billion invested under its China A Share strategy at end-November 2015.
Said Mr Wong: "Retail investors tend to move in herds, and today is one of them. So don't read too much into today's market meltdown, in a day or two, it'll stabilise."
Hugh Young, managing director of Aberdeen Asset Management Asia, said: "The trouble with China is it's really still a Wild West. Yes, there are some interesting companies, but the degree of confidence one can have is not as strong as say in an OCBC or whatever happens to be on one's own doorstep."
Mr Young remains positive on the Singapore market, which he felt was "pretty decent" a year ago but fell 14 per cent in 2015.
He thinks that there is value in the three local banks, which constitute more than a quarter of Aberdeen's S$713 million Singapore Equity Fund at end-November 2015.
A Singapore Exchange (SGX) market update noted that the FTSE ST All Share Index, which represents most mainboard-listed stocks, fell 10.6 per cent on a total return basis in 2015. Indonesian, Malaysian and Thai benchmarks, meanwhile, were down an average of 15.3 per cent in Singapore dollar terms, SGX said.
Several reasons were cited for China's market plunge on Monday. One was the Caixin China Purchasing Managers' Index reading of 48.2 for December, down from 48.6 in November. This disappointed analysts who had forecast a higher reading.
Another reason was the upcoming expiry of a ban on selling by large shareholders, which had been imposed last year to bring stability to markets. The ban expires this coming Friday.
By around 1.12pm on Monday, China's CSI 300 index, which tracks 300 large stocks listed in Shanghai and Shenzhen, had fallen 5 per cent from its previous close. The fall triggered a newly launched circuit breaker mechanism on up or down moves of such magnitudes that led to a 15-minute trading suspension of all stocks and stock index futures listed in Shanghai and Shenzhen.
After the 15-minute suspension, the CSI 300 index immediately fell further to take the decline for the day to 7 per cent. This triggered another mechanism that halted trading for the rest of the day.
"We're now going to find out whether the circuit breakers reduce volatility," said Charlie Awdry, who manages Henderson Global Investors' China strategies out of London.
"I don't believe there's any evidence that they do," he said.
Mr Awdry's US$172 million China Fund is invested in Hong Kong-listed counters such as Tencent, AIA Group and China Mobile as at end-November 2015. He said that he was avoiding China banks due to a worsening economic cycle, as well as expensive tech stocks. He likes the IT and software, consumer discretionary, education and healthcare sectors.
Aberdeen's Mr Young said that while the world is always beset with problems, there are always bright spots. "We have oil companies not doing well but we have airlines which benefit," he said.
"We just make sure we have the strongest players in various sectors, so even if things collapse, they survive and ultimately when it turns, they're profitable. For us, our watchword has always been balance sheets above all."