Asia: Market sell-off extends as British EU vote approaches

[HONG KONG] Asian markets mostly sank again on Tuesday, extending a recent sell-off following US declines, while fresh opinion polls fanned fears that Britain will vote to leave the European Union next week.

With policy meetings of the US and Japanese central banks this week, investors are staying cautious, analysts said, while Chinese traders are waiting to see if index compiler MSCI decides to include Shanghai in its global benchmarks list.

The Federal Reserve will conclude a two-day meeting on Wednesday and while it is not expected to hike interest rates for several months, investors hope it will give some guidance on monetary policy. Opinion is divided on whether the Bank of Japan will add to its stimulus when it finishes its own gathering Thursday.

With just over a week to go until Britain's referendum, a series of polls have put the pro-leave camp in front, raising the possibility that its four-decade ties to the bloc could be cut.

The prospect of one of the biggest economies in the EU breaking away has led to warnings of a new wave of world market turmoil as they struggle to recover from the panic that wiped trillions off valuations at the start of the year.

"To survive and thrive as a trader we simply have to adjust to volatility," Chris Weston, chief market strategist at IG in Melbourne, said in an e-mail to clients.

"The key consideration here is what happens if we do actually see a 'leave' vote and a sudden shock to markets. What have central banks got in the kitty this time around? The answer, of course, is significantly less than in prior cycles," he said, according to Bloomberg News.

In Asia Tuesday the British pound was wallowing around two-month lows of US$1.4213.

Tokyo stocks ended the morning session down 1.3 per cent - following a 3.5 per cent loss on Monday - with exporters hit by a surging yen.

The Japanese currency has rallied over the past week as traders look for safer investments to hedge against uncertainty.

In the morning the dollar bought 106.06 yen, down from 106.19 yen in New York, while the euro was at 119.80 yen, having fallen to a more than three-year low of 119 yen Monday.

Among other markets Sydney was down 1.8 per cent and Seoul 0.4 per cent while Manila lost more than one per cent.

However, some bargain-buying after the recent selling helped lift some markets, with Singapore, Taipei and Jakarta edging up.

Hong Kong and Shanghai each eased 0.1 per cent as investors wait to see if MSCI agrees to include the latter in its exclusive list, which would make it more appealing to big-name investors.

MSCI has in the past delayed approving Shanghai's inclusion owing to worries about market accessibility, among other reasons.

AFP