Asia: Stocks head for worst rout since 2011 on Brexit shock

[SYDNEY] Asian stocks headed for the steepest slump in five years as Britain's vote to leave the European Union stunned investors, raising concern that a divided Europe will further damage global growth.

The MSCI Asia Pacific Index dropped 4.4 per cent to 124.36 as of 3:56 pm in Tokyo. Japan's Topix plunged the most since 2011 and the S&P 500 Index futures tumbled 4.6 per cent.

The UK voted to quit the EU after more than four decades in a stunning rejection of the continent's postwar political and economic order, pressuring markets around the world.

"Fear is normally easier to profit from than greed. This is what we are seeing today," said Ang Kok Heng, Kuala Lumpur-based chief investment officer at Phillip Capital Management Bhd, which oversees US$630 million in Kuala Lumpur.

"Movements are so short term. Investors' reaction are so instant compared to when we get news from the broadsheet, its hard to call."

The Hang Seng Index lost 4.4 per cent. HSBC Holdings Plc, which has the second-biggest weighting on the benchmark Hang Seng gauge, plummeted 9 per cent in Hong Kong.

South Korea's Kospi index tumbled the most since May 212 and Australia's S&P/ASX 200 Index fell 3.2 per cent. Volumes Friday were at least 63 per cent above average in Japan, Hong Kong and Australia.

The debate over Britain's future dominated trading in June, with anxiety over the economic impacts of a Brexit, and the boost it could give to anti-establishment sentiment globally, stoking market volatility around the world.

Markets Rattled

Concern that the UK could secede has rattled stock markets this month, wiping more than US$1 trillion from global equity values last week alone. Bookmakers have been predicting a much lower chance of a "Leave" vote since the murder of pro-Europe British lawmaker Jo Cox last week.

Central bankers including Federal Reserve Chair Janet Yellen have indicated a victory for Brexit would destabilize global markets.

Central banks across Asia pledged to take action as needed to avert any breakdown in financial-market liquidity. Bank of Japan governor Haruhiko Kuroda and Japan's finance minister Taro Aso, whose country currently heads the Group of Seven, highlighted that six major developed nation central banks have currency-swap lines at the ready to provide liquidity.

South Korea and India were among those reported to have intervened to smooth trading in their currencies.

Divorce Talks

The final tally, announced just after 7 am London time, showed voters had backed "Leave" by 52 per cent to 48 per cent. The government's pro-EU campaign was defeated by more than 1 million ballots.

The vote sets the UK up for years of bitter divorce talks with the EU and deals a body blow to Prime Minister David Cameron, who said such a result would tip the country into recession.

Gauges of equity volatility across Asia surged. The HSI Volatility Index in Hong Kong surged 28 per cent, while the Nikkei Stock Average Volatility Index climbed 17 per cent. The Kospi 200 Volatility Index gained 24 per cent.

"Markets are very nervy at the moment," said Joe Rundle, head of trading at ETX Capital, a brokerage in London.

Yen Soars

The Topix plunged 7.3 per cent, the most in Asia. The gauge is down 22 per cent already in 2016. Brexit fear has pummeled Japanese stocks more than other markets amid concern a vote to leave the EU could push investors into haven assets such as the yen.

The currency soared past 100 per US dollar for the first time since November 2013. Morgan Stanley had warned that losses on the Topix will be bigger than elsewhere in Asia should Britain opt to leave the EU.

The Hang Seng Index halted a five-day gain as HSBC Holdings tumbled the most since 2011. With Hong Kong's stock market housing companies that get a bulk of revenues from the UK, it's hostage to any pound volatility a Brexit may bring.

With Hong Kong's currency pegged to the greenback, a drop in the sterling would mean lower revenue for companies in the city when converted to the home currency. Some companies like HSBC Holdings and Standard Chartered Plc have a more direct link with the UK.

New Zealand's S&P/NZX 50 Index slid 2.3 per cent, while stock indexes in Taiwan and Vietnam fell the most in five months.

India's S&P BSE Sensex slumped 3.8 per cent, poised for the steepest drop since August 2015, dragged down by a 12 per cent plunge in Jaguar Land Rover owner Tata Motors Ltd.

Indonesian shares were poised for the worst decline since Nov 30.

BLOOMBERG